My Free Speech Political Quotations and Commentaries Directory and Log
---
http://www.cs.trinity.edu/~rjensen/temp/Political/PoliticalQuotationsCommentaries.htm
If everyone is thinking alike, then somebody isn't
thinking.
George S. Patton
It's better to walk alone than in a crowd going in
the wrong direction.
Diane Grant
NAACP Holding Rally to Protest Voter ID Laws; Photo
IDs Required to Attend ---
http://thepunditpress.com/2014/02/08/naacp-holding-rally-to-protest-voter-id-laws-photo-ids-required-to-attend/
It’s clear that that evolutionary arc unsettles some
scholars. Stephen J. Whitfield, a professor of American studies at Brandeis
University, says he became disillusioned with the ASA as far back as the early
90s, when “it was becoming increasingly politicized in ways in which—though I
might share the politics, as a citizen—I didn't think were remotely appropriate
for a scholarly organization.” American Quarterly, the association's flagship
journal, was becoming “increasingly jargon-infested” and focused on “esoteric”
subjects, he says.
Christopher Shea, "Boycott Debate Is
Symptom of Broader Shift in American Studies," Chronicle of Higher Education,
January 27, 2014 ---
http://chronicle.com/article/Boycott-Debate-Is-Symptom-of/144183/
Apparently whole sections of the wealthy Upper East
Side are being snubbed by the city’s snow plows, leaving the 1-percenters to
contend with Mother Nature on their own. According to the NY Post: “He is trying
to get us back. He is very divisive and political,” said writer and life-long
Upper East Side mom Molly Jong Fast of Mayor de Blasio. “By not plowing the
Upper East Side, he is saying, ‘I’m not one of them.’”
The Governor of New Jersey plays mean politics with a bridge; The Mayor of
NYC plays mean politics with snow plows.
http://finance.townhall.com/columnists/michaelschaus/2014/01/22/de-blasio-refuses-to-plow-streets-of-wealthy-new-york-neighborhoods-n1782696
Hello! It's a good thing if emergency vehicles cannot reach the 1% anywhere in
the world.
In my opinion, a society that aims for equality
before liberty, will end up with neither equality nor liberty. And a society
that aims first for liberty, will not end up with equality, but it will end up
with a closer approach to equality, than any other kind of system than has ever
been developed. Now that conclusion, is based both on evidence across history,
and also I believe, on reasoning, which if you try to follow through the
implications of aiming first at equality, will become clear to you.
Milton Friendman ---
http://www.youtube.com/watch?v=pKxCWheH5Vk
Barack Obama beat Mitt Romney in the 2012 elections 65,909,451 Obama
to 60,932,176 Romney votes.
Among the 48 million people of food stamps, how many voted for Mitt Romney?
The GOP will never win without gaining half the food stamp votes. Any reduction
in food stamp recipients will be more than offset by the tens of millions of
people commencing in 2014 who will be receiving free or highly subsidized health
care and medications. The Republican Party has zero chance of winning future
presidential elections in the USA. Good thing I'm not a Republican. I'm the
continued Federal Reserve policy of printing trillions and trillions more
without taxing or borrowing. Eat, Drink, and be Merry --- at least in the few
years I have left in this crazy world.
Bob Jensen
Also see
http://www.caintv.com/obama-while-were-at-it-lets-ju
California Kids Go to Court to Demand a Good Education The state has
275,000 teachers. On average, two are fired annually for poor performance.
by Theodore J. Boutrous Jr., The Wall Street Journal, (see below)
"Most tax-friendly states for retirees," by Robert Powell, Yahoo
Finance, January 31, 2014 ---
http://finance.yahoo.com/news/most-tax-friendly-states-for-retirees-163509985.html
"California Kids Go to Court to Demand a Good Education The state has
275,000 teachers. On average, two are fired annually for poor performance,"
by Theodore J. Boutrous Jr., The Wall Street Journal, January 28, 2014
---
http://online.wsj.com/news/articles/SB10001424052702303553204579347014002418436?mod=djemMER_h
The trial began this week in a lawsuit in Los
Angeles Superior Court aimed at bringing meaningful and badly needed change
to California's public schools. The suit could have far-reaching effects in
American education—in particular on teacher-tenure policies that too often
work to the detriment of students.
I am among the lawyers representing nine brave
schoolchildren, ages 7 to 17, in Vergara v. California. Our arguments are
premised on what the California Supreme Court said more than 40 years ago:
that education is "the lifeline of both the individual and society," serving
the "distinctive and priceless function" as "the bright hope for entry of
poor and oppressed into the mainstream of American society." Every child,
the court held in Serrano v. Priest, has a fundamental right under the
California Constitution to equal educational opportunities.
We will introduce evidence and testimony that the
California school system is violating the rights of students across the
state. While most teachers are working hard and doing a good job, California
law compels officials to leave some teachers in the classroom who are known
to be grossly ineffective.
Because of existing laws, some of the state's best
teachers—including "teachers of the year"—are routinely laid off because
they lack seniority. In other cases, teachers convicted of heinous crimes
receive generous payoffs to go away because school districts know that there
is slim hope of dismissing them. California law makes such firings virtually
impossible. The system is so irrational that it compels administrators to
bestow "permanent employment"—lifetime tenure—on individuals before they
even finish their new-teacher training program or receive teaching
credentials.
As a result of this nonsensical regime, certain
students get stuck with utterly incompetent or indifferent teachers,
resulting in serious harm from which the students may never recover. Such
arbitrary, counterproductive rules would never be tolerated in any other
business. They should especially not be tolerated where children's futures
are at stake.
But in California, as in other states, outdated
laws, entrenched political interests, and policy gridlock have thwarted
legislative solutions meant to protect public-school students, who are not
old enough to vote and are in essence locked out of the political process.
That is why our plaintiffs decided to take a stand and bring this lawsuit
asserting their state constitutional rights.
Through this lawsuit, we are seeking to strike down
five state laws:
• The "last-in, first-out" or LIFO law, which
demoralizes teachers by reducing them to numbers based on their start date,
and forces schools to lay off the most junior teachers no matter how
passionate and successful they are at teaching students.
• The "permanent employment" law, which forces
school districts to make an irreversible commitment to keep teachers until
retirement a mere 18 months after the teachers' first day on the job—long
before the districts can possibly make such an informed decision.
• Three "dismissal" laws that together erect
unnecessary and costly barriers to terminating a teacher based on poor
performance or misconduct. Out of 275,000 teachers statewide, only two
teachers are dismissed each year on average for poor performance. In Los
Angeles, it costs an average of between $250,000 and $450,000 in legal and
other costs, and takes more than four years to dismiss a single teacher.
Even without these laws, ample protections exist for protecting public
employees—including teachers—from improper dismissal.
By forcing some students into classrooms with
teachers unable or unwilling to teach, these laws are imposing substantial
harm. One of our experts, Harvard economist Raj Chetty, recently analyzed
the school district data and anonymous tax records of more than 2.5 million
students in a large urban school district in the Northeast over a 20-year
period.
He found that students taught by a single highly
ineffective teacher experience a nearly 3% reduction in expected lifetime
earnings. They also have a lower likelihood of attending college and an
increased risk of teenage pregnancy compared with students taught by average
teachers. He also conducted a study showing that laying off the least
effective instead of the least experienced teachers would increase the total
lifetime earnings of a single classroom of Los Angeles students by
approximately $2.1 million.
Even worse, the data show that many of the least
effective teachers tend to end up in schools serving predominantly
low-income and minority communities. Thus these laws are exacerbating the
very achievement gap that education is supposed to ameliorate. For example,
a recent study of the Los Angeles Unified School District found that
African-American and Hispanic students are 43% and 68% more likely,
respectively, than white students to be taught by a highly ineffective
teacher. This disparity is the equivalent of losing a month or more of
school every year.
The California teachers unions are opposed to the
goals of our lawsuit and have intervened to help the state of California
defend these harmful laws. But the unions do not speak for all teachers. We
have heard from hundreds of teachers since we filed the case in May 2012.
These are teachers who don't want to be treated like a faceless seniority
number, and who don't want to be laid off just because they started teaching
three days after the ineffective, tenured teacher next door. Some of them
will testify during the trial.
Continued in article
Jensen Comment
I read where Venezuela made it impossible to fire workers. Do you think this is
a factor in the 40% absenteeism rate? In Chicago a handful of schools now fire
teachers for excessive absenteeism. This has led to significantly reduced
absenteeism relative to schools that still refuse to fire teachers for excessive
absenteeism.
Venezuela has some other dubious experiments. The male prisoners run the
prisons and, thereby, gave rise to many prisoners preferring to be in prison
than being on the outside. They eat well, pack guns, have women on demand, and
come and go at will. Does it come as any surprise that crime rates are very high
in Venezuela?
I preface this Tidbit by stating that the I support the President's proposal
for a $10.10 minimum wage subject to provisos that teens in general and student
interns who are given significant learning time and apprenticeship supervision
can work for a lower minimum wage.
"Schiff vs. Ritholtz: Political Correctness vs. Law of Supply and Demand,"
by Mike Shedlock, Townhall, February 2, 2014 ---
http://finance.townhall.com/columnists/mikeshedlock/2014/02/02/schiff-vs-ritholtz-political-correctness-vs-law-of-supply-and-demand-n1788363
"The Government Doesn’t Know How Much Its Student Loans Cost," by
Karen Weise, Bloomberg Businessweek, January 31, 2013 ---
http://www.businessweek.com/articles/2014-01-31/the-government-doesnt-know-how-much-its-student-loans-cost
Depending on whom you ask, the government
either makes tens of billions of dollars on the
backs of student borrowers, or more or less breaks even. The debate, which
boils down to the
arcana of accounting techniques, was hotly
contested last year, with Democrats such as Massachusetts Senator Elizabeth
Warren decrying how the government “profits” off student loans. The
controversy caused Congress
to ask the Government
Accountability Office to weigh in, which led to a
report
released today. The GAO came back with a non-answer,
finding that there’s no good way to know how much the government spends or
makes on funding student loans.
The GAO said it could take as long as 40 years to
figure the true costs of the program because there are so many variables,
from the overall interest rate environment to the number of students who
take advantage of different
repayment options. In the meantime, the government
is stuck using estimates that can vary greatly based on several factors,
most important the amount students pay in interest and what it costs the
government itself to borrow. The government readjusts its models each year
based on more recent data, which can lead to highly volatile results. One
year the budget assumed loans taken out in 2008 made the government
$9.09 per hundred dollars borrowed. The next year it estimated the very same
loans cost the government 24¢ per hundred dollars.
One figure is pretty clear: how much the Department
of Education spends administering the loans. That’s jumped from $314 million
in 2007 to $864 million in 2012, reflecting changes in the federal program
that removed banks as intermediaries and caused the number of loans directly
issued by the government to increase threefold. Overall, the administration
costs per borrower has stayed the same or even fallen slightly.
The overall difficulty in nailing down these
estimates is an increasingly relevant problem as student debt
tops $1 trillion—most of it financed by the
government.
Over 75% Off-Balance-Sheet Financing by Federal and State Governments (not
counting over a trillion dollars in unbooked entitlements obligations)
"Hiding the Financial State of the Union -- and the States," State
Data Lab, January 24, 2014 ---
http://www.statedatalab.org/
Next Tuesday, President Barack Obama will give the
annual “State of the Union” address. One of the most important issues is the
Financial State of the Union. But what about the Financial State of the
States?
Truth in Accounting has found that the lack of
truth and transparency in governmental budgeting and financial reporting
enables our federal and state governments to not tell us what they really
owe. Obscure accounting rules allow governments to hide trillions of dollars
of debt from citizens and legislators.
The President and many governmental officials tell
us the national debt is $17 trillion, but that does not include more than
$58 trillion of retirement benefits that have been promised to our veterans
and seniors. In addition, state officials do not report more than $948
billion of retirement liabilities.
The charts above show 77% of the federal
government's true debt is hidden and 75% of state government debt is hidden.
Total hidden federal and state debt amounts to more than $59 trillion, or
roughly $625,000 per U.S. taxpayer.
The five states with the greatest hidden debt
include Texas ($66 billion), Michigan ($67 billion), New York ($75 billion),
Illinois ($106 billion), and California ($112 billion).
Truth in Accounting promotes truthful, transparent
and timely financial information from our governments, because citizens
deserve to know the amount of debt they and their children will be
responsible for paying in the future.
Bob Jensen's threads on the sad state of governmental accounting ---
http://www.trinity.edu/rjensen/Theory02.htm#GovernmentalAccounting
QE Taper Admission of Failure? ---
http://finance.townhall.com/columnists/politicalcalculations/2014/02/09/real-gdp-forecasts-and-qe-n1791947
"Solar Thermal Technology Poses Challenges for Drought-Stricken
California: Reducing water consumption at solar thermal plants raises
costs and decreases power production," by Kevin Bullis, MIT's Technology
Review, February 2, 2014 ---
Click Here
http://www.technologyreview.com/news/523856/solar-thermal-technology-poses-challenges-for-drought-stricken-california/?utm_campaign=newsletters&utm_source=newsletter-daily-all&utm_medium=email&utm_content=20140203
California’s ambitious goal of getting a third of
its electricity from renewable energy sources by 2030 is being tested by its
driest year on record, part of a multiyear drought that’s seriously
straining water supplies. The state plan relies heavily on solar thermal
technology, but this type of solar power also typically consumes huge
quantities of water.
The drought is already forcing solar thermal power
plant developers to use alternative cooling approaches to reduce water
consumption. This will both raise costs and decrease electricity production,
especially in the summer months when demand for electricity is high. Several
research groups across the country are developing ways to reduce those costs
and avoid reductions in power output.
Solar thermal power plants use large fields of
mirrors to concentrate sunlight and heat water, producing steam that spins
power-plant turbines. Utilities like them because their power output is much
less variable than power from banks of solar panels (see “BrightSource
Pushes Ahead on Another Massive Solar Thermal Plant”
and “Sharper
Computer Models Clear the Way for More Wind Power”).
The drawbacks are that solar thermal plants
generate large amounts of waste heat, and they consume a lot of water for
cooling, which is usually done by evaporating water. Solar thermal plants
can consume twice as much water as fossil fuel power plants, and one
recently proposed solar thermal project would have consumed about 500
million gallons of water a year.
Continued in article
"Lake Mead is shrinking -- and with it Las Vegas' water supply,"
CBS News," January 30, 2014 ---
http://www.cbsnews.com/news/lake-mead-is-shrinking-and-with-it-las-vegas-water-supply/
When you head out on Nevada's Lake Mead, the first
thing you notice is a white line. That's where the water used to be.
What did this look like a decade ago?
"This was all underwater," said Pat Mulroy, the
general manager of the Southern Nevada Water Authority. "I mean boats were
everywhere. There was a whole marina here."
Mulroy said that the drought began 14 years ago.
Satellite photos show the Colorado River, which feeds Lake Mead, is drying
up -- so the lake is rapidly shrinking. Islands are growing, and boats are
floating far from where they once we
"It's a pretty critical point," Mulroy said. "The rate
at which our weather patterns are changing is so dramatic that our ability
to adapt to it is really crippled."
Lake Mead was created by the Hoover Dam in 1935. It
provides water for 20 million people in southern Nevada, southern California
and Arizona. Since 2000, the lake has lost 4 trillion gallons of water.
The bathtub ring is going to get bigger. Lake Mead
is expected to drop at least another 20 feet this year. If it does that
could trigger automatic cuts to the water supply for Nevada and Arizona.
That would hit Las Vegas hard. Ninety percent of the
area's water comes from the lake. At least one of the city's two intake
pipes could soon be above water. So to save the water supply Nevada is
rushing to build a third intake even deeper.
Concrete slabs are being lowered 650 feet
underground where a massive drill is creating a three-mile-long tunnel, one
inch per minute. The project should be finished next year and costs $817
million.
"We're really scrambling to make sure that this
intake is done in time before we lose our first intake," said J.C. Davis,
the project's spokesperson. "Without Lake Mead, there would be no Las
Vegas."
Despite its wasteful reputation, Las Vegas actually
reuses 93 percent of its water. It's paid homeowners $200 million to rip up
their thirsty lawns. The city added 400,000 people last decade but cut its
water use by 33 percent.
"All of us are in it together, and all of us are
either going to survive this or all of us are going to feel the
consequences," Mulroy said.
The consequences of a western resource in retreat.
"The State of the Federal Budget Is Opaque," by Ryan Alexander,
U.S. News, January 28, 2014 ---
http://www.usnews.com/opinion/blogs/economic-intelligence/2014/01/28/the-governments-accounting-practices-makes-budget-debates-worse
For budget nerds, tonight's
State of the Union speech is a prelude to the
president's budget, which will be introduced a little over a month from now.
The State of the Union usually presents a broad vision of goals and
priorities, but the budget gives us details about where the administration
would direct dollars to see those priorities implemented.
But even when we see the president's budget next
month, we still won't have a true picture of where we stand financially and
where we are going because we use a set of accounting principles that makes
it hard to get a clear picture of what our obligations are. That is because
the United States Government uses a cash based accounting system instead of
accrual accounting, the standard accounting practice for large, complex
entities.
What is the difference and why does it matter? The
short version is this: Cash accounting simply tracks money in and money out,
while accrual accounting takes into account all outstanding obligations.
This difference matters because, under cash accounting, it is possible to
ignore or underplay outstanding obligations the government must pay under
existing contracts and laws. Moreover, cash accounting makes it more
difficult to plan and budget for infrastructure upgrades and other major
investments.
[See
a collection of political cartoons on the budget and deficit.]
For decades, accounting professionals, presidential
commissions and the Congressional Budget Office alike have
recommended changing to accrual accounting as a
means to make the federal budget more transparent and to encourage fiscal
responsibility. The Securities and Exchange Commission requires that
publically traded companies use accrual accounting and otherwise follow the
so-called Generally Accepted Accounting Practices. The reason accrual
accounting is favored is simple: It encourages large entities to reflect and
plan for long-term fiscal health rather than simply looking at today's cash
flow, which is the accounting principle version of living
paycheck-to-paycheck.
Moving all federal budgeting and accounting to
accrual standards seems like an obvious step. It will increase our
understanding of our true deficits and debts and improve transparency and
accountability across the government. So why, despite recommendations to
make this change, starting as far back as the first Hoover Commission in
1949, hasn't the U.S. adopted this standard? The short answer is that making
this change requires political will. And as we have seen for decades,
politicians love to skew numbers to support their own positions instead of
relying on vetted, neutral numbers.
Lawmakers are able to game the Congressional Budget
Office scoring rules to hide long-term costs outside the 10-year budget
window. Shifting to accrual accounting would shift debates about the
long-term liabilities and benefits of different government actions out of
the realm of political arguments and into the realm of agreed upon facts.
Continued in article
Over 75% Off-Balance-Sheet Financing by Federal and State Governments
"Hiding the Financial State of the Union -- and the States," State
Data Lab, January 24, 2014 ---
http://www.statedatalab.org/
Next Tuesday, President Barack Obama will give the
annual “State of the Union” address. One of the most important issues is the
Financial State of the Union. But what about the Financial State of the
States?
Truth in Accounting has found that the lack of
truth and transparency in governmental budgeting and financial reporting
enables our federal and state governments to not tell us what they really
owe. Obscure accounting rules allow governments to hide trillions of dollars
of debt from citizens and legislators.
The President and many governmental officials tell
us the national debt is $17 trillion, but that does not include more than
$58 trillion of retirement benefits that have been promised to our veterans
and seniors. In addition, state officials do not report more than $948
billion of retirement liabilities.
The charts above show 77% of the federal
government's true debt is hidden and 75% of state government debt is hidden.
Total hidden federal and state debt amounts to more than $59 trillion, or
roughly $625,000 per U.S. taxpayer.
The five states with the greatest hidden debt
include Texas ($66 billion), Michigan ($67 billion), New York ($75 billion),
Illinois ($106 billion), and California ($112 billion).
Truth in Accounting promotes truthful, transparent
and timely financial information from our governments, because citizens
deserve to know the amount of debt they and their children will be
responsible for paying in the future.
Bob Jensen's threads on the sad state of governmental accounting ---
http://www.trinity.edu/rjensen/Theory02.htm#GovernmentalAccounting
"7 Big Lies Conservatives Want You To Believe About Martin Luther King,
Jr.," Robyn Pennacchia, Business Insider, January 20, 2014 ---
http://www.businessinsider.com/7-big-lies-conservatives-want-you-to-believe-about-martin-luther-king-jr-2014-1
Jensen Comment
A truth that seems long forgotten is the plagiarism on his doctoral thesis ---
http://www.trinity.edu/rjensen/Plagiarism.htm#Celebrities
A politically-motivated IRS harassed Martin Luther King, Jr.
http://taxprof.typepad.com/taxprof_blog/2014/01/martin-luther-king.html
"Generational Mobility in the United States," by Nobel Laureate Gary
Becker, Becker-Posner Blog, February 2, 2014 ---
http://www.becker-posner-blog.com/2014/02/generational-mobility-in-the-united-states-becker.html
"Social Mobility and Income Inequality," by Judge Richard Posner,
Becker-Posner Blog, February 2, 2014 ---
http://www.becker-posner-blog.com/2014/02/social-mobility-and-income-inequalityposner.html
What's Not to Love About Agribusiness Pork
"A Farm Bill Only a Lobbyist Could Love," by Alan Bjerga and Julie
Bykowicz, Bloomberg Businessweek, January 30m 2014 ---
http://www.businessweek.com/articles/2014-01-30/farm-bill-draws-lobbyist-horde
"Strassel: So God Made a Farm Bill: A famous speech about those who
toil in the fields gets an update," by Kimberly A. Strassel, The Wall
Street Journal, January 3, 2014 ---
http://online.wsj.com/news/articles/SB10001424052702303973704579353064008442176?mod=djemMER_h
(With apologies to the late radio great Paul
Harvey. )
And on the eighth day, God looked down on his
planned paradise and said, "I need a caretaker." So God made a farmer.
God said, "I need somebody willing to get up before
dawn, milk cows, work all day in the fields, milk cows again, and then go to
Washington and claim that this particular type of hard work is somehow
unique in America and ought to be underwritten by the rest of the nation. I
need a willing audience for that plea—a group clever enough and self-serving
enough to see the electoral profit of standing for Carhartts, wheat fields
and John Deere tractors." So God made a Congress.
He said, "I need somebody in that Congress savvy
enough to realize that farming means food, and food means nutrition, and
nutrition means good things to voters, so farming means food stamps.
Somebody to call to make that assistance bigger and forever, tame howls over
soaring deficits, and plant the seeds of perpetual votes. Somebody to
threaten to label anybody pushing for reform as rich, cruel and downright
hateful of happy, cornfed children playing in hay lofts—and mean it." So God
made a Democratic Party.
God said, "I need somebody willing to spend five
long years complaining about overspending, big government and
special-interest giveaways. And get up and vote for $1 trillion in
overspending, bigger government and special-interest giveaways—in the name
of farmers. Then—when reminded of his reform promises—dry his eyes and say,
'Maybe next year.' I need somebody to fret about drought, wax about food
security, and muse (in private) that heedless government shutdowns really do
have consequences. Including pressuring parties to prove they can accomplish
something by voting for 949-page spending extravaganzas that nobody has
bothered to read. Somebody willing to put in 40 hours spinning excuses for
abandoning his principles and then, pained from the camera lights, put in 70
hours more." So God made Republicans.
God had to have Democrats and Republicans willing
to cast aside their differences in the name of handouts, and bale a
legislative vehicle together with the strong bonds of self-interest. A
vehicle that would combine food stamps and farm pork and thereby guarantee a
coalition so powerful that it could mow over procedural ruts, race ahead of
political rain and hogtie pesky opponents. A vehicle so unstoppable that its
creators would laugh and then sigh, and then reply, with smiling eyes, when
the reformers vowed change: "Good luck, suckers." So God made a farm bill.
God said: "I need somebody mighty enough to divert
money to those who need it least, yet sneaky enough to do it behind closed
doors. I need somebody to wheedle, deal, logroll, beg, trade, and cajole
subsidy checks for corporate agribusiness, sushi rice, catfish,
Christmas-tree promotion boards, biorefineries and at least 15 sitting
members of Congress. Somebody to make sure there are no caps on subsidies
and no asset tests for food stamps. Somebody in a nice suit. Somebody who
has never been on a farm." So God made lobbyists.
He said, "I need somebody or something to help
patriotic Americans forget that 80% of that 'farm' bill is going to welfare,
and most of the rest to sugar barons and cotton kings who vacation in
Mallorca. Somebody or something to ensure people don't get to wondering why
it is we have a 'farm' bill when we don't have a 'laptop' bill, or a
'vampire-novel' bill or a 'swing-set' bill in this free-market economy that
Americans supposedly prize. Somebody or something who will so inspire the
public with homespun images of clapboard churches and cows, leathery men
holding rope, sheepdogs, plaid shirts, cowboy hats, and American flags that
folks will entirely fail to realize that the people pictured—the hardworking
souls tilling the back 40—are these days the last to see a dime of farm-bill
money." So God made Ram pickup trucks and Super Bowl commercials.
Finally, God looked down on all he'd created and He
said: "Now I need somebody who really will work hard. Somebody who'll get up
day in and day out to plow through traffic to work, come home to help the
kids and make the dinner and do the laundry, and struggle with the bills,
and get up to do it all over again.
Continued in article
Jensen Comment
Sadly our government cannot make rain in the southwest like it prints money out
thin air.
From the CFO Journal's Morning Ledger on January 30, 2014
Reid breaks with Obama on trade deals
Senate Majority Leader Harry Reid broke with the White House,
saying he opposes legislation to smooth passage of free-trade agreements, a
declaration that imperils two major deals being negotiated with Asian and
European partners,
the WSJ reports. The
strongest business support for trade negotiations comes from companies that
do the most business overseas, including Hollywood studios and exporters of
heavy machinery. Businesses with more of a U.S. focus, such as makers of
textiles and autos, are worried the trade deals could expose them to what
they say is unfair competition from abroad.
"Harry Reid's Trade Veto: Are Democrats playing a double political
game on free trade?" The Wall Street Journal, January 29, 2014 ---
http://online.wsj.com/news/articles/SB10001424052702304428004579351180680000934?mod=djemMER_h
President Obama on Tuesday night asked Congress "to
work together on tools like bipartisan trade promotion authority" to lift
exports and "protect our workers." Republicans were quick to reject the
offer—no, wait, they applauded. That was Democratic Senate Majority Leader
Harry Reid who declared barely half a day later that "I'm against fast
track" and "I think everyone would be well-advised just not to push this
right now."
Democrats control the Senate, so this doesn't bode
well for what is supposedly one of Mr. Obama's main 2014 pro-growth
priorities. Senate Finance Chairman Max Baucus might have been able to buck
Mr. Reid, but he's leaving to become ambassador to China. Oregon's Ron Wyden
is taking over the Finance Committee, and he's sending mixed signals on
trade.
The sudden opposition makes us wonder if this isn't
a rigged double game. President Obama gets to appeal to Fortune 500 CEOs by
pushing freer trade, while Senate Democrats drag their feet to appease
unions and extort campaign cash from business in an election year. Democrats
get the money but nothing gets done. That's how House Democrats played trade
deals in 2009-2010 when Mr. Obama claimed to support pacts with South Korea,
Columbia and Panama, but Speaker Nancy Pelosi refused to allow a vote. The
pacts finally passed in 2011 after Republicans took the House.
Harry's veto underscores that if Mr. Obama is going
to get a trade victory, he's going to have to spend some political capital
persuading his own party. That is, if he really wants a negotiating success
and isn't looking for a political excuse to drop the whole thing.
"New IRS rules would scuttle tea parties 'All they did was shift
tactics',' World Net Daily, January 19, 2014 ---
http://www.wnd.com/2014/01/new-irs-rules-would-scuttle-tea-parties/
Say What?
"MSNBC's Joe Scarborough And Mika Brzezinski 'Eviscerate' Hoboken Mayor For
Sandy Aid Claims," by Brett LoGiurato, Business Insider, January 20,
2014 ---
http://www.businessinsider.com/scarborough-brzezinski-dawn-zimmer-hoboken-mayor-sandy-aid-christie-2014-1
Jensen Comment
I'm inclined to believe the Hoboken mayor and will never vote for Chris Christie
to be President of the United States for many reasons.
"8 "Groundhog" States Overspend Over and Over Again," State Data Lab,
January 2014 ---
http://www.statedatalab.org/chart_of_the_day/
. . .
(in millions) |
2010 |
2011 |
2012 |
|
|
|
|
California |
$15,720 |
$320 |
$330 |
Connecticut |
3,450 |
480 |
480 |
Hawaii |
830 |
430 |
390 |
Illinois |
9,260 |
5,030 |
1,590 |
Louisiana |
860 |
340 |
730 |
Maryland |
1,530 |
490 |
570 |
New Jersey |
6,680 |
4,770 |
5,370 |
New York |
5,860 |
1,020 |
1,380 |
Continued in article
Jensen Comment
More governors should block the bridges to overspending approved budgets. In
most of the above states the state share of Medicaid is about 30%-40% of total
state spending.
I don't know whether school
district spending is factored into this data. I doubt it except for each state's
contribution to school district funding --- which varies greatly by school
district. On the local PBS television station, the Governor of Vermont is
complaining that Vermont's funding of education is unsustainable. I suspect
there are many school districts across the USA struggling with the same
unsustainable funding issues. The big urban school districts like those in
Chicago comprise Exhibit A.
Question
Who are the taxpayers that pay the highest taxes in the USA are they as
undeserving as Paul Krugman would like to make us think?
"Jobs and Income Growth of Top Earners and the Causes of Changing Income
Inequality: Evidence from U.S. Tax Return Data," by Jon Bakija, Adam Cole,
and Bradley T. Heim, April 2012 ---
http://web.williams.edu/Economics/wp/BakijaColeHeimJobsIncomeGrowthTopEarners.pdf
Jensen Comment
If you made an assignment for students to critically evaluate this study and the
above table in particular, what things might you look for.
- I would look for the difference between wealth and income. This is
probably the most fundamental problem of Table 1 above. Many wealthy people
are "land poor" or otherwise have their wealth tied up in investments that
yield very taxable little income relative to wealth. For example, a rancher
that owns a $100 million ranch may actually be losing money and would not be
included in Table 1 above. The rancher might even qualify for Medicaid free
medical care and medicines under the new ACA rules in some states. A
billionaire may have money tied up in her company's stock and stock options
that pay no dividends while her salary is so modest that she's not included
in the above Table 1. I would argue that Table 1 above may in fact not
include the most really wealthy people because they have tax shelters
galore.
- The above Table 1 ignores the underground economy where
multimillionaires from drug and other crime operations don't report most of
their massive cash inflow. Big players in the underground economy may not be
hardened criminals per se but deal in the world of tax avoidance in a big
way.
- Table 1 above raises enormous questions regarding how taxpayers are
classified. Is Oprah Winfrey in classified as "media" or as an
"executive of several closely held businesses?" How does "real estate"
differ from "large-scale farmers" from "CEO of an enormous corporation
that deals heavily in real estate, agribusiness, manufacturing, and
information technology? Taxpayers might, on their tax returns, identify
themselves as CEOs of their companies when in fact they could have reported
themselves as being in such occupations as "sports." medical,"
"engineering," "computer," "ranchers," etc. Ted turner owns more ranch land
than any other living person. Is he a "rancher?" My point is that
taxpayers self-select when reporting their occupations on tax returns.
Thus occupation reporting is subject to a huge amount of self-selection
error.
- High income people typically have enormous variations in income over
time for a nearly infinite variety of reasons whether they are wealthy or
not. Maybe they are like President Obama who doubled his salary early
in his presidency with book royalties that faded away after the first couple
of years. Sometimes taxpayers were short-term CEOs of high-flying companies
for several years before those companies crashed. Sometimes they split their
assets in a divorce where she "got the gold mine and he got the shaft."
Sometimes they simply had a year in which they willingly or unwillingly had
atypical capital gains. More often they still are doing quite well after
discovering tax shelters that make them look almost poor. My point is that
many (most?) taxpayers in Table 1 made it only once or move in and out of
Table 1. Thus the tendency to identify the "1%" as a stable subset of
taxpayers in Table 1 is a fallacy.
Paul Krugman alleges that most of the above people are "undeserving rich"
because they have such high incomes
"The Underserving Rich," by Paul Krugman, The New York Times,
January 19, 2014 ---
http://www.nytimes.com/2014/01/20/opinion/krugman-the-undeserving-rich.html?partner=rssnyt&emc=rss&_r=0
. . .
What’s wrong with this story? Even on its own terms,
it postulates opportunities that don’t exist. For example, how are children
of the poor, or even the working class, supposed to get a good education in
an era of declining support for and sharply rising tuition at public
universities? Even social indicators like family stability are, to an
important extent, economic phenomena: nothing takes a toll on family values
like lack of employment opportunities.
But the main thing about this myth is that it
misidentifies the winners from growing inequality. White-collar
professionals, even if married to each other, are only doing O.K. The big
winners are a much smaller group. The Occupy movement popularized the
concept of the “1 percent,” which is a good shorthand for the rising elite,
but if anything includes too many people: most of the gains of the top 1
percent have in fact gone to an even tinier elite, the top 0.1 percent.
And
who are these lucky few? Mainly they’re executives
of some kind, especially, although not only, in finance. You can argue about
whether these people deserve to be paid so well, but one thing is clear:
They didn’t get where they are simply by being prudent, clean and sober.
So how can the myth of the deserving rich be
sustained? Mainly through a strategy of distortion by dilution. You almost
never see apologists for inequality willing to talk about the 1 percent, let
alone the really big winners. Instead, they talk about the top 20 percent,
or at best the top 5 percent. These may sound like innocent choices, but
they’re not, because they involve lumping in married lawyers with the wolves
of Wall Street. The DiCaprio movie of that name, by the way, is
wildly popular with finance types, who cheer on
the title character — another clue to the realities of our new Gilded Age.
Again, I know that these realities make some people,
not all of them hired guns for the plutocracy, uncomfortable, and they’d
prefer to paint a different picture. But even if the facts have a well-known
populist bias, they’re still the facts — and they must be faced.
Jensen Question
What is Paul Krugman really saying and has he backed it up with evidence worthy
of an academic rather than as a politician?
He's actually obfuscating, because he has no idea how most of the taxpayers in
Table 1 got to be included in Table 1. I concede that many of the CEOs are
horribly overpaid because they stacked their corporate boards with cronies who
approved their outrageous salaries. Some are in Table 1 because of golden
parachutes that rewarded them outrageously for poor performance. Some are there
because the stock prices of their companies soared for reasons other than
credits that can be give to the CEO's policies and leadership such as windfall
asset value increases ---
Bob Jensen's threads on Outrageous Executive Compensation Schemes ---
http://www.trinity.edu/rjensen/FraudConclusion.htm#OutrageousCompensation
Some of the taxpayers in Table 1 are somewhat undeserving because they
inherited most of their wealth and should be given credit simply for not having
squandered it away.
But Paul Krugman does not give enough credit to deserving taxpayers in
Table 1 who raised themselves up from almost nothing.
Exhibit A is Bill Gates; Exhibit B is Steve Jobs; Exhibit C is Oprah Winfrey;
and Exhibit D is Martha Stewart. There are additionally hundreds of thousands of
millionaires who similarly raised themselves up from nothing due to
determination, extremely hard work, talent, risk-taking, and/or luck.
Paul Krugman gives way too much credit to education being a condition
to becoming a millionaire or billionaire.
Education is more of a condition to becoming middle class or upper middle class
like becoming an accountant, engineer, pharmacist, professor, or medical doctor.
The millionaires and billionaires may or may not be able to attribute
huge financial success to their educations.
More often than not it was more of a function of risk taking, blood, sweat,
tears, talent, and luck. Many millionaire farmers, ranchers, hotel owners,
restaurant owners, sports stars, movie actors, writers, inventors, musicians,
and other types of small business owners and performers succeeded because of
working 80 hours a week and taking chances by borrowing money on a shoe string
business while living the American Dream ---
http://www.cs.trinity.edu/~rjensen/temp/SunsetHillHouse/SunsetHillHouse.htm
If Paul Krugman really wants to back up his allegations that most of the
millionaires and billionaires are "The Underserving Rich"
I suggest that he and his students examine the Forbes listings of USA
multi-millionaires and billionaires and show us how many seemingly succeeded
because of American Dream talent, tireless work, and financial risk
taking.
The worst thing you can do to the poor is to take away the American Dream.
The worst thing you can do is take away the incentives to work tirelessly and
take chances on financial leverage to become millionaires. If you crush that
dream in the USA you will not be helping the poor in the long run.
Eliminating inequality is not synonymous with helping the poor. In my opinion,
inequality is a necessary condition for helping the poor.
What we can do is to try to eliminate opportunities for becoming both rich
undeserving.
We can find ways to eliminate outrageous executive compensation and golden
parachutes and the conflicts of interest cause by having corporate boards
appointed by CEOs deciding on lavish pay of the CEOs who appointed their cronies
to those boards. We can eliminate lawyer billion-dollar puniotive damage
windfalls that are completely out of line with their labor and risk taking.
We can try much harder to reduce the $2 trillion underground cash economy. We
can get much more serious about punishing individuals for frauds and not just
their companies and banks.
One of the more controversial areas is elimination of tax shelters.
Elimination and modification of tax shelters may be a goal, but great care must
be taken in doing so. Some tax shelters have become part and parcel to
motivating financial risk taking that, in turn, is an important factor in the
American Dream. Also, a degree of equilibrium has been reached in the financing
of charities, financing of local, county, and state government and development,
financing of pensions, etc. Great care must be taken to avoid enormous and
unfair shocks in the economic and social fabric of the nation.
I do favor increased estate taxation, but here again I think those increases
should not greatly damage the American Dream. This is difficult, because many of
the people striving to achieve the American Dream are doing so more for the
benefit of their children and grandchildren than themselves. Thus, I'm not in
favor of estate taxation that that is totally dysfunctional to the American
Dream. Thus I'm in favor of letting each child or grandchild inherit a million
or somewhat more dollars, but I object to a child inheriting multi-millions.
The bottom line is that we can do a lot to build up rather than tear down the
American Dream. The American Dream is part and parcel to the continued economic
prosperity of the USA. Without such a dream the incentives to work, innovate,
and take entrepreneurial risks might evaporate as witnessed in Sweden and
Finland where marginal tax rates on high income taxpayers were lowered to
stimulate the GDP.
Shahid Khan: The New Face Of The NFL And The American Dream "Face of the
American Dream: Immigrant-Turned-Billionaire" ---
http://www.cs.trinity.edu/~rjensen/temp/SunsetHillHouse/SunsetHillHouse.htm#ShahidKhan
Bob Jensen's threads on the American Dream ---
http://www.cs.trinity.edu/~rjensen/temp/SunsetHillHouse/SunsetHillHouse.htm
Warning:
Some taxpayers should up their withholding amounts after crying over some of the
tax bad news below.
"Seven Sneaky Taxes for 2014," by Bruce Kennedy, 24/7 Wall Street,
January 10, 2014 ---
http://247wallst.com/special-report/2014/01/10/seven-sneaky-taxes-for-2014/
This Time It's No Joke: Italy is dangerously deteriorating ---
http://www.businessinsider.com/italian-unemployment-hits-37-year-high-2014-1
Jensen Comment
Seems like unemployment is an enormous problem for every EU nation bordered by
the Mediterranean Sea, especially youth unemployment rates approaching 50%.
However, the economy of Spain is picking up while the economies of France and
Italy are headed for the drink. Socialism taxes and regulations and car burning
riots hurt France. Anarchy and government instability and lack of tax
enforcement hurt Italy. Can Northern Europe really save Southern Europe is will
a day come when Northern Europe will just stop trying?
Tax Policy Center: TaxVox (Brookings Tax Policy Center) ---
http://taxvox.taxpolicycenter.org/
Questions
How does the English Literature major differ from a Sociology major or a Gender
Studies major at UCLA?
Would Accounting Majors object if we did the same thing in the accounting
curriculum?
Jensen Comment
There can be differences between sexual orientation studies in sociology versus
English literature in term of focus on selected scholars in history and perhaps
neglected contributions of those scholars to a discipline. But I think the
research and writing contributions should stand on their own apart from the
gender, race, and sexual orientation of the scholar.
I sympathize that we should expand what we know and teach in every academic
discipline. Genetic discoveries should replace much of what we used to teach in
biology. Surgeons should become skilled with laser scalpels. We should learn
more about the important contributions of diverse races and women in history.
But do we really care to study the sexual orientation of John Maynard Keynes
if doing so pushes out some of the required study of his economic theories? I
don't! His sexual orientation was his personal business.
I think undergraduate students in any discipline facing certification
examinations would object if certification examination content was extensively
removed from the curriculum in favor of extensive sociology and gender studies
content. For example, accounting majors would object if we took most CPA
examination content out of the curriculum in favor of most any other academic
content. Engineering majors would object if they took most engineering out of
the curriculum. Nursing majors would object if they had studied minimal nursing
examination content. The same with pharmacy majors, education majors, etc. Who
cares about English "Literature" majors? Sigh!
It's bad enough that we took accounting out of accountancy doctoral programs
---
http://www.trinity.edu/rjensen/Theory01.htm#DoctoralPrograms
For those of you wanting to replace Accounting Principles 102 content with
gender studies of accountants, some of the course material might be drawn from
http://www.trinity.edu/rjensen/bookbob2.htm#Women
There are also some good modules on accounting gender studies in the AAA
Commons.
I don't have any curriculum material for transgendering and sexual
orientation in accounting, although one of my closest friends (in church) is a
transgendered accountant. In the discipline of economics there is a
transgendering book reference at |
http://en.wikipedia.org/wiki/Deirdre_McCloskey
Deirdre has the good sense to not let her transgendering overtake her devotion
to classical economic history and statistics history in her courses. I
got to know her somewhat in personal correspondence and really, really respect
her classical scholarship where I think she would prefer that transgendering be
ignored in her course and research content ---
http://www.cs.trinity.edu/~rjensen/temp/DeirdreMcCloskey/StatisticalSignificance01.htm
Some undergraduate majors like math majors might object to taking traditional
math out of the curriculum even if they do not face certification examinations.
They may especially object if political activists have pushed out traditional
discipline content in mathematics.
At the moment are there better places to major in English literature than
UCLA? I can't really answer that, but I know that I would prefer that at least
one course in Shakespeare should be required in every English literature
curriculum. Then I could perhaps get an intelligent answer about Shakespeare
when having lunch with an English literature graduate. And I really don't care
about the sexual orientation of Shakespeare or having a conversation about his
sexual orientation with someone who has never studied any of Shakespeare's plays
and poetry. It would not really interest me if the Bard was or was not a cross
dresser.
"The Humanities Have Forgotten Their Humanity When Shakespeare lost out to
'rubrics of gender, sexuality, race, and class' at UCLA, something vital was
harmed," by Heather Mac Donald, The Wall Street Journal,
January 3, 2013 ---
http://online.wsj.com/news/articles/SB10001424052702304858104579264321265378790?mod=djemEditorialPage_h
In 2011, the University of California at Los
Angeles wrecked its English major. Such a development may seem
insignificant, compared with, say, the federal takeover of health care. It
is not. What happened at UCLA is part of a momentous shift that bears on our
relationship to the past—and to civilization itself.
Until 2011, students majoring in English at UCLA
had to take one course in Chaucer, two in Shakespeare, and one in Milton
—the cornerstones of English literature. Following a revolt of the junior
faculty, however, during which it was announced that Shakespeare was part of
the "Empire," UCLA junked these individual author requirements. It replaced
them with a mandate that all English majors take a total of three courses in
the following four areas: Gender, Race, Ethnicity, Disability and Sexuality
Studies; Imperial, Transnational, and Postcolonial Studies; genre studies,
interdisciplinary studies, and critical theory; or creative writing.
In other words, the UCLA faculty was now officially
indifferent to whether an English major had ever read a word of Chaucer,
Milton or Shakespeare, but the department was determined to expose students,
according to the course catalog, to "alternative rubrics of gender,
sexuality, race, and class."
Such defenestrations have happened elsewhere, and
long before 2011. But the UCLA coup was particularly significant because the
school's English department was one of the last champions of the
historically informed study of great literature, uncorrupted by an
ideological overlay. Precisely for that reason, it was the most popular
English major in the country, enrolling a whopping 1,400 undergraduates.
The UCLA coup represents the characteristic
academic traits of our time: narcissism, an obsession with victimhood, and a
relentless determination to reduce the stunning complexity of the past to
the shallow categories of identity and class politics. Sitting atop an
entire civilization of aesthetic wonders, the contemporary academic wants
only to study oppression, preferably his or her own, defined reductively
according to gonads and melanin.
Course catalogs today babble monotonously of group
identity. UCLA's undergraduates can take courses in Women of Color in the
U.S.; Women and Gender in the Caribbean; Chicana Feminism; Studies in Queer
Literatures and Cultures; and Feminist and Queer Theory.
Not so long ago, colleges still reflected the
humanist tradition, which was founded not on narcissism but on the
all-consuming desire to engage with the genius and radical difference of the
past. The 14th-century Florentine poet Francesco Petrarch triggered the
explosion of knowledge known today as Renaissance humanism with his
discovery of Livy's monumental history of Rome and the letters of Cicero,
the Roman statesman whose orations, with their crystalline Latin style,
would inspire such philosophers of republicanism as John Adams and Thomas
Jefferson.
But Petrarch wanted to converse with the ancients
as well as read them. So he penned heartfelt letters in Latin to Virgil,
Seneca, Horace and Homer, among others, informing them of the fate of their
writings and of Rome itself. After rebuking Cicero for the vindictiveness
revealed in his letters, Petrarch repented and wrote him again: "I fear that
my last letter has offended you. . . . But I feel I know you as intimately
as if I had always lived with you."
In 1416, the Florentine clerk Poggio Bracciolini
discovered the most important Roman treatise on rhetoric moldering in a
monastery library outside Constance, a find of such value that a companion
exclaimed: "Oh wondrous treasure, oh unexpected joy!"
Bracciolini thought of himself as rescuing a
still-living being. The treatise's author, Quintilian, would have "perished
shortly if we hadn't brought him aid . . ." Bracciolini wrote to a friend in
Verona. "There is not the slightest doubt that that man, so brilliant,
genteel, tasteful, refined, and pleasant, could not longer have endured the
squalor of that place and the cruelty of those jailors."
This burning drive to recover a lost culture
propelled the Renaissance humanists into remote castles and monasteries to
search for long-forgotten manuscripts. The knowledge that many ancient texts
were forever lost filled these scholars with despair. Nevertheless, they
exulted in their growing repossession of classical learning.
In François Rabelais's exuberant stories from the
1530s, the giant Gargantua sends off his son to study in Paris, joyfully
conjuring up the languages—Greek, Latin, Hebrew, Chaldean and Arabic—that he
expects his son to master, as well as the vast range of history, law,
natural history and philosophy.
This constant, sophisticated dialogue between past
and present would become a defining feature of Western civilization,
prompting the evolution of such radical ideas as constitutional government
and giving birth to arts and architecture of polyphonic complexity. And it
became the primary mission of the universities to transmit knowledge of the
past, as well as—eventually—to serve as seedbeds for new knowledge.
Compare the humanists' hunger for learning with the
resentment of a Columbia University undergraduate, who had been required by
the school's core curriculum to study Mozart. She happens to be black, but
her views are widely shared, to borrow a phrase, "across gender, sexuality,
race and class."
"Why did I have to listen in music humanities to
this Mozart?" she groused in a discussion of the curriculum reported by
David Denby in "Great Books," his 1997 account of re-enrolling in Columbia's
core curriculum. "My problem with the core is that it upholds the premises
of white supremacy and racism. It's a racist core. Who is this Mozart, this
Haydn, these superior white men? There are no women, no people of color."
These are not the idiosyncratic thoughts of one disgruntled student; they
represent the dominant ideology in the humanities today.
W.E.B. Du Bois would have been stunned to learn how
narrow is the contemporary multiculturalist's self-definition and sphere of
interest. Du Bois, living during America's darkest period of hate,
nevertheless heartbreakingly affirmed in 1903 his intellectual and spiritual
affinity with all of Western civilization: "I sit with Shakespeare and he
winces not. Across the color line I move arm in arm with Balzac and Dumas. .
. . I summon Aristotle and Aurelius and what soul I will, and they come all
graciously with no scorn nor condescension."
It is no wonder, then, that we have been hearing of
late that the humanities are in crisis. A recent Harvard report from a
committee co-chaired by the school's premier postcolonial studies theorist,
Homi Bhabha, lamented that 57% of incoming Harvard students who initially
declare interest in a humanities major eventually change concentrations. Why
may that be? Imagine an intending lit major who is assigned something by
Professor Bhabha: "If the problematic 'closure' of textuality questions the
totalization of national culture. . . ." How soon before that student
concludes that a psychology major is more up his alley?
No, the only true justification for the humanities
is that they provide the thing that Faust sold his soul for: knowledge. It
is knowledge of a particular kind, concerning what men have done and created
over the ages.
The American Founders drew on an astonishingly wide
range of historical sources and an appropriately jaundiced view of human
nature to craft the world's most stable and free republic. They invoked
lessons learned from the Greek city-states, the Carolingian Dynasty and the
Ottoman Empire in the Constitution's defense. And they assumed that the new
nation's citizens would themselves be versed in history and political
philosophy.
But humanistic learning is also an end in itself.
It is simply better to have escaped one's narrow, petty self and entered
minds far more subtle and vast than one's own than never to have done so.
The Renaissance philosopher Marsilio Ficino said that a man lives as many
millennia as are embraced by his knowledge of history. One could add: A man
lives as many different lives as are embraced by his encounters with
literature, music and all the humanities and arts. These forms of expression
allow us to see and feel things that we would otherwise never
experience—society on a 19th-century Russian feudal estate, for example, or
the perfect crystalline brooks and mossy shades of pastoral poetry, or the
exquisite languor of a Chopin nocturne.
Continued in article
Jensen Comment
As long as the English majors at UCLA don't care if they've not studied
Shakespeare since high school, who are we to care? Perhaps Oscar Wilde is more
important than Shakespeare in terms of core studies in English literature at
UCLA.
Bob Jensen's threads on higher education controversies ---
http://www.trinity.edu/rjensen/HigherEdControversies.htm
Video Series
Milton Friedman & John Kenneth Galbraith’s Present Their Opposing Economic
Philosophies on Two TV Series (1977-1980) ---
http://www.openculture.com/2014/01/milton-friedman-john-kenneth-galbraith-tv-shows.html
The Age of Uncertainty
- The Prophets and Promise of
Classical Capitalism
- The Manners and Morals of High
Capitalism
- The Dissent of Karl Marx
- The Colonial Idea
- Lenin and the Great Ungluing
- The Rise and Fall of Money
- The Mandarin Revolution
- The Fatal Competition
- The Big Corporation
- Land and People
- The Metropolis
- Democracy, Leadership,
Commitment
- Weekend in Vermont (part one,
part two,
part three)
Free to Choose
- The Power of the Market
- The Tyranny of Control
- Anatomy of a Crisis
- From Cradle to Grave
- Created Equal
- What’s Wrong with Our Schools?
- Who Protects the Consumer?
- Who Protects the Worker?
- How to Cure Inflation
- How to Stay Free
Related Content:
Milton Friedman on Greed
The History of Economics & Economic Theory Explained with Comics, Starting
with Adam Smith
An Introduction to Great Economists — Adam Smith, the Physiocrats & More —
Presented in a Free Online Course
60-Second Adventures in Economics: An Animated Intro to The Invisible
Hand and Other Economic Ideas
Economics:
Free Online Courses
Jensen Comment
For me the most important point in all the above is Professor Friedman's warning
about ruining an economy with unfunded and runaway entitlement obligations that
can only be settled with breach of promises or hyperinflation. The most ruinous
form of entitlement is a promise to pay whatever the cost such as medical care
and medication obligations in Medicare and Medicaid insurance. In particular,
the Medicare D prescription drug program initiated by George W. Bush will be a
disaster. President Obama admits that Medicare entitlements cannot be
sustained, but reducing those entitlements is tantamount to political suicide.
Medicaid will become a disaster now that even millionaires with proper
financial planning can qualify for free medical care and medications --- such as
students with million dollar trust funds.
Entitlements are two-thirds of the federal budget.
Entitlement spending has grown 100-fold over the past 50 years. Half of all
American households now rely on government handouts. When we hear statistics
like that, most of us shake our heads and mutter some sort of expletive. That’s
because nobody thinks they’re the problem. Nobody ever wants to think they’re
the problem. But that’s not the truth. The truth is, as long as we continue to
think of the rising entitlement culture in America as someone else’s problem,
someone else’s fault, we’ll never truly understand it and we’ll have absolutely
zero chance...
Steve Tobak ---
http://www.foxbusiness.com/business-leaders/2013/02/07/truth-behind-our-entitlement-culture/?intcmp=sem_outloud
Bob Jensen's threads on entitlements ---
http://www.trinity.edu/rjensen/Entitlements.htm
"Fracking Boom Keeps Home Heating Bills in Check Prices of Natural Gas
Avoid Volatility of Past Winters," by Russell L. Gold, The Wall Street
Journal, January 28, 2014 ---
http://online.wsj.com/news/articles/SB10001424052702303277704579349092247419158?mod=djemCFO_h
Freezing temperatures are creating near-record
demand for natural gas in the U.S. as shivering Americans turn up the heat
and plug in their electric blankets.
Natural-gas prices have jumped in response, topping
$5 per million British thermal units for the first time since 2010 as fuel
has been pulled from underground storage vaults to keep furnaces running and
electric utilities humming.
But compared with past cold snaps, such as in 2000,
the price surge has been muted, according to utilities and other big gas
users.
That is good news for businesses and consumers.
Manufacturers that consume large amounts of the fuel—steelmakers, for
example—say they have trouble planning for sharp price changes. And
homeowners on fixed incomes can be hit especially hard when utilities raise
prices.
In the short term, higher prices help gas drillers,
many of which have been losing money on wells in a supply glut. Over the
long term, though, stable prices attract demand for gas from power
companies, trucking firms and railroads.
American Electric Power Co. AEP +0.70% , one of the
country's biggest electricity generators, is pleased to have a less-volatile
market. "It is a lot different," said Marguerite Mills, vice president of
fuels procurement. "We can go out and find supply."
The difference today is the U.S. energy boom, which
over the past few years has created vast supplies of the fuel, in part
through hydraulic fracturing. As a result, the natural-gas market isn't
gripped with fear that refilling storage could take years, a concern behind
panicky trading a few years ago that sent gas prices over $10 per million
BTUs.
Natural gas closed Tuesday at $5.03 per million
BTUs, up 40% since the beginning of September. Some local markets jumped
higher as pipelines maxed out.
But during a cold snap in December 2000, gas prices
doubled in 2½ months. In 2000, the U.S. produced about 52.5 billion cubic
feet a day of gas. Last year, it produced 66 billion cubic feet a day.
Today, there is a lot of "production to build back
inventory levels to normal," said Jack Weixel, director of analysis for
Bentek Energy, which tracks natural-gas data. "You can climb back onto the
horse a lot quicker." Gas consumption on Tuesday was the second highest on
record, he said, nearly eclipsing the record set Jan. 7.
New supplies from shale formations, such as the
Marcellus Shale in the Northeast, have had a profound impact on gas prices
and lowered volatility.
"The available of the Marcellus and other shale gas
has really dampened the effects of weather," said Joe Gregorini, a vice
president of Peoples Natural Gas, a Pittsburgh utility that has 700,000
customers. "This is one of the coldest winters we've seen in our service
territories in decades, but the available of natural-gas supplies has
insulated customers."
AK Steel Holding Corp. AKS +18.70% said Tuesday
that the rise in gas prices cost the West Chester, Ohio, company a few
million dollars more than expected but that it wasn't terribly concerned.
"Later this year or perhaps even later this month…gas will come back down,"
Chief Financial Officer Roger K. Newport said in an earnings conference
call.
In the past, price jumps driven by cold weather
quickly trickled down into home-heating bills. About half of U.S. households
use gas for heat. In 2000, gas prices began the winter at $4 per million
BTUs, then spiked above $10 for several days.
Local gas utilities passed along these higher
prices, and the cost of home heating nearly doubled to $624 for the winter
of 2000-'01 from $380 a year earlier, according to federal records.
Businesses also were affected. The Federal Reserve
Bank of San Francisco reported that farmers idled production to avoid paying
more to keep their greenhouses warm.
This year, some customers will get pinched by
higher prices but there won't be a heavy wallop. Many states require that
utilities lock in what their customers pay for natural gas and electricity
for months at a time. The companies determine those fees from the prices
they pay for gas under long-term contracts, which are less susceptible to
price swings.
Electricity generators that need to buy natural gas
at higher winter prices can sometimes turn to other sources of fuel, such as
coal, if natural-gas is scarce or prices are too high.
Continued in article
"Former NYC workers charged in disability scam," by Jennifer Peltz and
Collen Long, Associated Press, January 7, 2013 ---
http://hosted.ap.org/dynamic/stories/U/US_POLICE_DISABILITY_FRAUD?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2014-01-07-14-39-55
One retired police officer who said he couldn't
work taught martial arts, prosecutors said. Another who claimed he was
incapable of social interactions manned a cannoli stand at a street
festival, they said. A third who said his depression was so crippling that
it kept him house-bound was photographed aboard a Sea-Doo watercraft.
All were wrongly receiving thousands in federal
disability benefits, prosecutors said Tuesday in announcing a sweeping fraud
case involving scores of retired officers, as well as former firefighters
and jail guards. The retirees faked psychiatric problems, authorities said,
and some falsely claimed their conditions arose after the Sept. 11 attacks.
"The brazenness is shocking," said Manhattan
District Attorney Cyrus R. Vance Jr.
Four ringleaders coached the former workers on how
to feign depression and other mental health problems that allowed them to
get payouts high as $500,000 over years, Vance said. The ringleaders made
tens of thousands of dollars in secret kickbacks, Vance said.
The four - retired officer Joseph Esposito, 64;
John Minerva, 61, a disability consultant with the detective's union; lawyer
Raymond LaVallee, 83; and a benefits consultant Thomas Hale, 89 - sat
stolidly as they pleaded not guilty Tuesday to high-level grand larceny
charges. All were released on bail, ranging from $250,000 to $1 million.
Their lawyers said all four staunchly denied the
accusations, and some noted that their clients had legitimate jobs helping
people seek benefits. Minerva did "what he thought was being done in the
correct fashion," said his lawyer, Glenn Hardy. "I don't think he was
steering people or telling people what to say when they applied for those
benefits."
Hale's lawyer, Brian Griffin noted that according
to prosecutors, many of the benefit-seekers had been found eligible for city
disability pensions before they got federal benefits.
But prosecutors argued that eligibility for Social
Security disability benefits is a higher bar - complete inability to work -
than qualifying for a city worker disability pension. And they said the
applicants strategically lied, with the ringleaders' guidance, to make
themselves appear to meet it.
They were taught how to fail memory tests and how
to act like a person suffering from depression or post-traumatic stress
disorder, prosecutors said. If they were claiming to be traumatized by 9/11,
"they were instructed to say that they were afraid of planes or they were
afraid of tall buildings," Assistant District Attorney Christopher Santora
told a judge.
More than 100 were arrested, including 72 city
police officers, eight firefighters, five corrections officers and one
Nassau County Police Department officer.
Police Commissioner William Bratton said the
arrests were an effort to ensure "the memories of those who did in fact
contribute their lives or their physical well-being to dealing with 9/11 are
not sullied."
Former police officer Louis Hurtado taught martial
arts in Odessa, Fla., according to the studio's website. Online photos
showed onetime cop Joseph Morrone smiling at the cannoli stand during a TV
interview during the San Gennaro Festival in 2009. In another photo, a
smiling, tanned Glen Lieberman, a retired officer, gestures obscenely at the
camera from aboard a watercraft.
Morrone pleaded not guilty and was released without
bail. There was no answer at Hurtado's listed number in Florida. The
Associated Press couldn't locate a home phone number for Lieberman.
Many of the defendants said they could not use a
computer but had Facebook pages, Twitter handles and YouTube channels,
prosecutors said.
Patrick Lynch, president of the Patrolmen's
Benevolent Association, said the union didn't condone the filing of false
claims, but "we caution everyone to recognize that there are serious
psychological illnesses resulting from the devastating work performed by
first responders following the attack on the World Trade Center and in
performing the dangerous and difficult work of police officers."
Continued in article
Jensen Comment
The only surprise is that more city employees did not jump on the gravy train
like disability recipients in Florida.
Bob Jensen's Fraud Updates are at
http://www.trinity.edu/rjensen/FraudUpdates.htm
"Buffalo Grove may not be so great, after all," State Data Lab,
January 14, 2014 ---
http://www.statedatalab.org/news/detail/buffalo-grove-may-not-be-so-great-after-all
CNN Money
included Buffalo Grove as one of the top 50 places
to live. CNN placed the village at 46 and highlighted that the village
"enjoys economic stability."
Truth in Accounting reviewed the village's audited
financial report and found a different story. While the balance sheet
indicates the village has $21 million available to be used to meet a current
and future bills, this amount does not take into account more than $60
million of off-balance sheet liabilities.
These liabilities represent unfunded pension and
retirees' health care commitments of $62.7 million. If this amount was
included in its bills, the village needs $41.9 million to pay the bills it
has accumulated to date.
This amount is almost three times the property
taxes collected. Each taxpayer's (household's) share is $2,585.
Buffalo Grove, like most Cook County
municipalities, has large amounts of unfunded retirement benefits. Buffalo
Grove's police and firefighters’ pensions are unfunded by more than four
times their payroll. In other words, the village would have to stop paying
their police and firefighters for four years and divert all of those funds
to their pension plans just to catch up.
The lack of truth and transparency in local
government finances has resulted in the accumulation of significant debt
without public knowledge. Fortunately, people are now focusing on the
debt of Illinois and the federal government. Unfortunately, people aren't
aware that debt is most likely a problem in their local government as well.
Continued in article
Truth in Accounting has also examined the comparisons between Chicago and the
bankrupt city of Detroit ---
http://www.rebootillinois.com/chicago-detroit-comparison-not-far-fetched-says-truth-in-accounting
Bob Jensen's threads on the sad state of government accounting ---
http://www.trinity.edu/rjensen/Theory02.htm#GovernmentalAccounting
"Unreliable German Solar and Wind Forcing New Coal Boom," PJ Media,
January 25, 2014 ---
http://pjmedia.com/blog/unreliable-german-solar-and-wind-forcing-new-coal-boom/?singlepage=true
Not surprisingly, a wind farm operator is at the
center of Germany’s latest major financial swindle.
With 1,300 employees, Prokon is a relatively small
company. Yet its advertisements were well-known to Germans. They always had
three parts: pictures of a wind farm; a vague message that “something” had
to be “changed”; and a request to make a loan to Prokon. In return, one was
promised nothing less than “a future worth living,” and 8 percent interest
per annum.
One of these propositions must have been alluring
to many Germans, for the company successfully gathered about 1.3 billion
euros (2 billion dollars) in borrowed capital. That’s small money compared
to Enron, Lehman Brothers, or Greece, but in the case of Prokon, no banks or
equity funds were involved. All of the capital came from retail investors,
some of whom gave a big chunk of their lifetime savings, according to media
reports.
Now, we know that the whole operation was a Ponzi
scheme. The interest was paid with the money from newcomers. Journalists are
adding insult to injury, asking how Prokon´s creditors could have been so
naïve with such an “extraordinarily high” interest rate being promised. Some
coverage has mentioned that many of the investors were allegedly “elderly
people.”
According to this media, one has to be well beyond
the peak of cerebral activity to believe that a windfarm could generate
enough profit to pay an 8 percent interest. Very well, then. But if so, how
can it possibly be wise that windmills are supposed to become the backbone
of the German electricity grid?
Is Germany a gigantic Prokon?
In his “climate change speech” at Georgetown
University in June 2013, President Obama said:
Countries like China and Germany are going all in
the race for clean energy. I want America to win that race, but we can’t win
it if we’re not in it.
If it were up to the majority of the German people,
however, they would rather opt out and let someone else win. According to
surveys, only 18 percent approve of the current energy policy. Sixty percent
of Germans reject the push for so-called “green” energy if it leads to
higher prices, and the same amount think it inevitably does.
They are correct: the electricity price in Germany
has doubled between 2000 and 2013. It is now about three times pricier than
electricity in the U.S. because staggering amounts of money were channeled
into solar and windmill companies. Last year alone, German households paid
20 billion euros (27 billion USD) for a “renewable energies surcharge,”
which amounts to 240 euros (325 USD) for every citizen. More than 100
billion euros have been sunk into solar energy, which is the least efficient
source and contributes only four percent to German electricity production.
Germany has as many solar panels as the rest of the world combined — in a
country where the sky is usually overcast.
Outside of the urban areas, there are windmills
everywhere. Residents complain about the destruction of the landscape, the
health hazards of infrasound, and plummeting real estate prices.
Electricity prices rise further with every windmill
and solar panel installation because of how the “renewable energies
surcharge” is calculated. The law is based on the idea that the owner of a
windmill or a solar panel deserves a fixed return on his investment. Owners
are guaranteed a long-term feed-in tariff — which is way above the market
price. The consequence has been a massive overbuilding of “renewables” at
the expense of consumers (industrial companies with high electricity
consumption are exempted from the surcharge). This has triggered a debate
about families with low incomes who have to spend an ever-growing segment of
their budget on electricity.
Common sense suggests that nobody should pay for
unsolicited goods. Unfortunately, common sense has no jurisdiction here.
Instead, statist remedies are being discussed to cure an illness caused by
statism.
Last year, Peter Altmaier – then the German
minister for the environment — proposed that the state provide the poor with
new refrigerators. Next, he said the unemployed could be trained to become
advisors on energy saving. Like members of a Soviet Komsomol brigade, they
would go door-to-door telling people to put a lid on the pot when cooking.
Nobody embraced Altmaier´s ideas, but nobody offered a different
proposition. So the question was dropped altogether.
It has become clear that “renewable” energies cause
problems for the grid. There are no viable means for storing the
electricity; it has to be consumed as it is produced. Production and
consumption have to match. The larger the percentage of production coming
from fickle solar and wind energy, the more difficult the job of the grid
operator is. When Germany doesn’t produce enough electricity, it needs to
import it from its neighbors, like it did in 2011 and 2012, when Merkel’s
decision to immediately shut down eight nuclear power plants (out of fear
that a tsunami like in Japan could strike them) would have caused a
blackout. Austria and France stepped in to fill the gap. Sure enough, nobody
ever thanked Germany’s friends. Instead, German environmentalists bragged
about Germany’s record electricity exports.
Continued in article
Bob Jensen's fraud updates ---
http://www.trinity.edu/rjensen/FraudUpdates.htm
Questions
At what point do local taxpayers object to paying for billion-dollar
professional sports stadiums for teams owned by billionaires, rewarding players
earning tens of millions each year, and providing kickbacks to corrupt business
firms and labor unions largely at taxpayer expense?
Is public debt serving the debt of a mega-sports stadium in Detroit, Chicago,
etc. more important than funding municipal services and schools? I think the
economic benefits of such stadiums to cities is overhyped.
At what point do nations refuse to host costly and corruption-ridden Olympics
events. The price tag for the Winter Olympics in Russia is over $51 billion and
counting.
"The Waste and Corruption of Vladimir Putin's 2014 Winter Olympics,"
By Joshua Yaffa, Bloomberg Businessweek, January 3, 2014 ---
http://www.businessweek.com/articles/2014-01-02/the-2014-winter-olympics-in-sochi-cost-51-billion
From 24/7 Wall Street on January 9, 2013
The U.S. has the highest corporate tax rate in
the developed world
After Japan lowered its tax rate last year, the combined federal and average
state tax rate of 39.2% in the U.S. was the highest of any nation in the
Organization for Economic Co-operation and Development. Some
mega-corporations pay little in federal or state taxes. General Motors,
which had annual revenue of more than $150 billion, received a tax benefit
of $28.6 billion.
These are the companies paying the most (and least) taxes.
http://247wallst.com/special-report/2014/01/08/companies-paying-the-most-taxes/2/
Jensen Comment
The amount of taxes paid by corporations, especially large corporations, can
vary greatly from year-to-year. For example, a few years ago GE was paying no
corporate income tax, but this has since changed since GE's CEO became the top
economic advisor to President Obama.
The USA may have the highest corporate tax breaks but Congress salivating
over lobbying graft has salted the corporate tax code with lots of tax breaks.
This is the reason why many of the largest USA corporations pay a lot less than
others. This is why I personally favor eliminating corporate income taxes in
favor of offsetting VAT taxes. Businesses hate the VAT tax since it's easier to
collect and more immune from cheating. Business firms also fear that federal and
state governments will run wild with a VAT tax. Nations in other parts of the
world favor the VAT tax, especially nations having weak corporate and personal
tax law enforcement --- like Greece.
Glass-Steagall Act ---
http://en.wikipedia.org/wiki/Glass-Steagall_Act
"JPMorgan's Madoff Settlement Could Prove Elizabeth Warren Right," by Linette
Lopez, Business Insider, January 7, 2013 ---
http://www.businessinsider.com/jpm-settlement-proves-warrens-point-2014-1
Another day,
another $1.7 billion in fines for JP Morgan. This
time, it's for failing to catch Ponzi schemer Bernie Madoff as it managed
his ill gotten gains. Now the bank has to admit that it didn't have the
systems in place to catch Madoff and implement them under a deferred
criminal prosecution agreement.You could
call this a case of "too big to manage," one of anti-Wall Street crusader
Senator Elizabeth Warren's (D-MA) favorite catchphrases.
Back in November, she used it to talk about
reinstating Glass-Steagall, the regulation that once split commercial
and investment banks.
"The new Glass-Steagall
Act would attack both 'too big' and 'to fail,'" Warren said..."It would
reduce failures of the big banks by making banking boring, protecting
deposits, and providing stability to the system even in bad times. And it
would reduce 'too big' by dismantling the behemoths, so that big banks would
still be big—but not too big to fail or, for that matter, too big to
manage, too big to regulate, too big for trial, or too big for jail."
In terms of management, the Madoff case is a
catastrophe arguably worse than the London Whale.
Sure, the London Whale ended up costing JP Morgan
$6 billion, and it was born in the bank's own Chief Investment Office, but
that failing trade was only hidden from JPM's execs for about half a year.
Madoff managed to fool everyone for decades.
Well, almost everyone. There were people at JP
Morgan who sounded the alarm, according to Iriving Picard, the trustee
appointed by New York's bankruptcy trustee to review Madoff's case for his
"clients".
Picard's 2011 report indicates that two JPM
executives knew something was wrong with Madoff, Risk Chairman John Hogan
and COO Matt Zames.
Here's a quote from Hogan back in 2007
(From Picard's report, via CNN Money):
Continued in article
Jensen Comment
For its inception I've never been a cheerleader for repeal the Glass-Steagall
Act.
"Warmers Use Magic to Create the Illusion of Science," by John Ransom,
Townhall, January 7, 2014 ---
http://finance.townhall.com/columnists/johnransom/2014/01/07/warmers-use-magic-to-create-the-illusion-of-science-n1772595
. . .
The UN’s Intergovernmental Panel on Climate Change
(IPCC) has recently been forced to concede that a whole raft of predictions
they’ve made have been incorrect. Global temperatures have risen to only 25%
as high as predicted according to the IPCC models; as recently as the late
Middle Ages, the earth enjoyed a period of approximately 300 years which
were as warm if not warmer than today; and the IPCC is at a loss to explain
why an Arctic sea ice is accumulating rather than shrinking as they had
predicted.
In Australia’s New South Wales, the state
government has ordered municipal governments to ignore IPCC estimates of sea
rise that when measured against historical records, have been off by as much
as 90%.
Some municipalities have taken aggressive action
based on the too-aggressive forecasts by the IPCC writes The Australian ---
http://www.theaustralian.com.au/national-affairs/state-politics/nsw-councils-advised-to-sidestep-ipcc-models/story-e6frgczx-1226791682301#mm-premium
Virginia Supreme Court
"Dispute Over Climate Scientist's Records Pits Academe Against Media Groups,"
by Peter Schmidt, Chronicle of Higher Education, January 9, 2014 ---
http://chronicle.com/article/Dispute-Over-Climate/143881/
"I Have Not Yet Begun to Write: Responding to the New York Times’ Farrago
of Dishonesty, Insinuations, and Ad Hominem ," by
Craig
Pirrong, Streetwise Professor, December 10, 2014 ---
http://streetwiseprofessor.com/?p=7930
“Streetwise Professor” is the web persona of me, who happens to be Craig
Pirrong.* My day job (to the extent that I have a real job) is as
Professor of Finance and Energy Markets Director of the Global Energy
Management Institute at the Bauer College of Business, University of
Houston. I have been in academia since 1989–shortly before the Ferruzzi
soybean squeeze on the Chicago Board of Trade in July of that year,
which was quite propitious and which had a big impact on the trajectory
of my career. I have a PhD in Business Economics from the Graduate
School of Business at the University of Chicago.
Looking at my cv one
might have a hard time identifying a common thread, but it is there. My
formal training is as an industrial organization economist, but I took
the PhD finance sequence at Chicago. My thesis was on an application of
core theory, completed under the tutelage of a great economist, Lester
Telser. I think core theory is an extremely valuable tool, but the
profession is not quite so enthusiastic. During my first academic job in
the Business Economics Group at the Michigan Business School,
recognizing that core theory was not my road to academic success, I was
casting around for a new research direction, and Ferruzzi provided it.
Through a series of serendipitous events, I had the opportunity to work
on a project evaluating how to re-design the Chicago Board of Trade
Markets to reduce the likelihood of a repeat of the events of July,
1989. This led to many academic spinoffs.
Specifically, the Ferruzzi episode and my work on the CBT project
made me aware of many interesting points of contact between finance and
IO, and much of my research has explored that nexus. I’ve written a good
deal on manipulation in financial markets–manipulation is a
manifestation of market power, which is a core concept in IO. Since
exchanges have some legal responsibility to prevent and deter
manipulation in financial markets, I became interested in the incentives
that exchanges face in carrying out such tasks. This in turn required an
analysis of the organization of governance of exchanges–another
IO-related subject. Moreover, it soon became clear that the incentives
of exchanges to adopt efficiency enhancing measures also depends on the
nature of competition between them, the analysis of which resulted in
several articles on the “macrostructure”–the industrial organization– of
financial markets.
Along the way, the study of commodity markets like soybeans or oil
which have been manipulated from time to time sparked an interest in
commodity price formation and commodity price dynamics, and their
implications for derivatives pricing. My most active research in this
area focuses on electricity prices and electricity derivatives, but I am
also working on models applicable to storable commodities.
My academic work has also allowed me to serve as an expert in legal
cases involving commodities and derivatives.
Outside of academia and litigation consulting my time is spent
primarily with my family–my wife Terry, and my daughters Renee and
Genevieve. I have a deep interest in history–particularly the history of
the US Civil War–that dates back to my childhood, and that I continue to
pursue through reading and travel; I would have become a historian if I
had been independently wealthy. I am also a big Chicago sports fan,
although I have to say that the Cubs’ persistent ineptitude is slowly
draining me of my interest in baseball, and the Bulls–oy. The
Blackhawks–double oy. The Bears, you say? Well, we’ll see if they’re for
real or not soon.
* The original version of this page didn’t include my name. Never
really thought about it. I wrote it in haste late one night in
January, 2006, and didn’t really look at it after it was originally
posted. I didn’t intend for this to be an anonymous blog, and I
certainly gave enough biographical and photographic evidence to let
anyone interested figure out who I am. Indeed, many people figured it
out, and I also gave out the blog name to a lot of folks. I’ve edited
this bio page to include my name because a reporter who has interviewed
me from time to time in the past came across it, and thought that the
blogger sounded familiar, but wasn’t sure it was me. So, now there’s
no possibility for confusion.
- See more at: http://streetwiseprofessor.com/?page_id=8#sthash.YwXYreyj.dpuf
“Streetwise Professor” is the web persona of me, who happens to be Craig
Pirrong.* My day job (to the extent that I have a real job) is as
Professor of Finance and Energy Markets Director of the Global Energy
Management Institute at the Bauer College of Business, University of
Houston. I have been in academia since 1989–shortly before the Ferruzzi
soybean squeeze on the Chicago Board of Trade in July of that year,
which was quite propitious and which had a big impact on the trajectory
of my career. I have a PhD in Business Economics from the Graduate
School of Business at the University of Chicago.
Looking at my cv one
might have a hard time identifying a common thread, but it is there. My
formal training is as an industrial organization economist, but I took
the PhD finance sequence at Chicago. My thesis was on an application of
core theory, completed under the tutelage of a great economist, Lester
Telser. I think core theory is an extremely valuable tool, but the
profession is not quite so enthusiastic. During my first academic job in
the Business Economics Group at the Michigan Business School,
recognizing that core theory was not my road to academic success, I was
casting around for a new research direction, and Ferruzzi provided it.
Through a series of serendipitous events, I had the opportunity to work
on a project evaluating how to re-design the Chicago Board of Trade
Markets to reduce the likelihood of a repeat of the events of July,
1989. This led to many academic spinoffs.
Specifically, the Ferruzzi episode and my work on the CBT project
made me aware of many interesting points of contact between finance and
IO, and much of my research has explored that nexus. I’ve written a good
deal on manipulation in financial markets–manipulation is a
manifestation of market power, which is a core concept in IO. Since
exchanges have some legal responsibility to prevent and deter
manipulation in financial markets, I became interested in the incentives
that exchanges face in carrying out such tasks. This in turn required an
analysis of the organization of governance of exchanges–another
IO-related subject. Moreover, it soon became clear that the incentives
of exchanges to adopt efficiency enhancing measures also depends on the
nature of competition between them, the analysis of which resulted in
several articles on the “macrostructure”–the industrial organization– of
financial markets.
Along the way, the study of commodity markets like soybeans or oil
which have been manipulated from time to time sparked an interest in
commodity price formation and commodity price dynamics, and their
implications for derivatives pricing. My most active research in this
area focuses on electricity prices and electricity derivatives, but I am
also working on models applicable to storable commodities.
My academic work has also allowed me to serve as an expert in legal
cases involving commodities and derivatives.
Outside of academia and litigation consulting my time is spent
primarily with my family–my wife Terry, and my daughters Renee and
Genevieve. I have a deep interest in history–particularly the history of
the US Civil War–that dates back to my childhood, and that I continue to
pursue through reading and travel; I would have become a historian if I
had been independently wealthy. I am also a big Chicago sports fan,
although I have to say that the Cubs’ persistent ineptitude is slowly
draining me of my interest in baseball, and the Bulls–oy. The
Blackhawks–double oy. The Bears, you say? Well, we’ll see if they’re for
real or not soon.
* The original version of this page didn’t include my name. Never
really thought about it. I wrote it in haste late one night in
January, 2006, and didn’t really look at it after it was originally
posted. I didn’t intend for this to be an anonymous blog, and I
certainly gave enough biographical and photographic evidence to let
anyone interested figure out who I am. Indeed, many people figured it
out, and I also gave out the blog name to a lot of folks. I’ve edited
this bio page to include my name because a reporter who has interviewed
me from time to time in the past came across it, and thought that the
blogger sounded familiar, but wasn’t sure it was me. So, now there’s
no possibility for confusion.
- See more at: http://streetwiseprofessor.com/?page_id=8#sthash.YwXYreyj.dpuf
“Streetwise Professor” is the web persona of me, who happens to be Craig
Pirrong.* My day job (to the extent that I have a real job) is as
Professor of Finance and Energy Markets Director of the Global Energy
Management Institute at the Bauer College of Business, University of
Houston. I have been in academia since 1989–shortly before the Ferruzzi
soybean squeeze on the Chicago Board of Trade in July of that year,
which was quite propitious and which had a big impact on the trajectory
of my career. I have a PhD in Business Economics from the Graduate
School of Business at the University of Chicago.
Looking at my cv one
might have a hard time identifying a common thread, but it is there. My
formal training is as an industrial organization economist, but I took
the PhD finance sequence at Chicago. My thesis was on an application of
core theory, completed under the tutelage of a great economist, Lester
Telser. I think core theory is an extremely valuable tool, but the
profession is not quite so enthusiastic. During my first academic job in
the Business Economics Group at the Michigan Business School,
recognizing that core theory was not my road to academic success, I was
casting around for a new research direction, and Ferruzzi provided it.
Through a series of serendipitous events, I had the opportunity to work
on a project evaluating how to re-design the Chicago Board of Trade
Markets to reduce the likelihood of a repeat of the events of July,
1989. This led to many academic spinoffs.
Specifically, the Ferruzzi episode and my work on the CBT project
made me aware of many interesting points of contact between finance and
IO, and much of my research has explored that nexus. I’ve written a good
deal on manipulation in financial markets–manipulation is a
manifestation of market power, which is a core concept in IO. Since
exchanges have some legal responsibility to prevent and deter
manipulation in financial markets, I became interested in the incentives
that exchanges face in carrying out such tasks. This in turn required an
analysis of the organization of governance of exchanges–another
IO-related subject. Moreover, it soon became clear that the incentives
of exchanges to adopt efficiency enhancing measures also depends on the
nature of competition between them, the analysis of which resulted in
several articles on the “macrostructure”–the industrial organization– of
financial markets.
Along the way, the study of commodity markets like soybeans or oil
which have been manipulated from time to time sparked an interest in
commodity price formation and commodity price dynamics, and their
implications for derivatives pricing. My most active research in this
area focuses on electricity prices and electricity derivatives, but I am
also working on models applicable to storable commodities.
My academic work has also allowed me to serve as an expert in legal
cases involving commodities and derivatives.
Outside of academia and litigation consulting my time is spent
primarily with my family–my wife Terry, and my daughters Renee and
Genevieve. I have a deep interest in history–particularly the history of
the US Civil War–that dates back to my childhood, and that I continue to
pursue through reading and travel; I would have become a historian if I
had been independently wealthy. I am also a big Chicago sports fan,
although I have to say that the Cubs’ persistent ineptitude is slowly
draining me of my interest in baseball, and the Bulls–oy. The
Blackhawks–double oy. The Bears, you say? Well, we’ll see if they’re for
real or not soon.
* The original version of this page didn’t include my name. Never
really thought about it. I wrote it in haste late one night in
January, 2006, and didn’t really look at it after it was originally
posted. I didn’t intend for this to be an anonymous blog, and I
certainly gave enough biographical and photographic evidence to let
anyone interested figure out who I am. Indeed, many people figured it
out, and I also gave out the blog name to a lot of folks. I’ve edited
this bio page to include my name because a reporter who has interviewed
me from time to time in the past came across it, and thought that the
blogger sounded familiar, but wasn’t sure it was me. So, now there’s
no possibility for confusion.
- See more at: http://streetwiseprofessor.com/?page_id=8#sthash.YwXYreyj.dpuf
The New York Times,
in
an article written by David Kocieniewski, has singled out me and the
University of Illinois’ Scott Irwin for an extended
ad hominem
treatment alleging that our statements and research on commodity
speculation are tainted due to financial connections with “Wall Street.”
As one individual put it to me, the article is “nasty, biased and
thinly researched.” All true (if incomplete-the list of sins is even
longer). But at the risk of providing credence to the incredible, I
believe some sort of response is warranted. So here it goes.
Let me
start by saying I have been very fortunate. I have been able to pursue
my academic passions, publish papers and books on them, and consult and
testify as an expert witness on many matters related to these passions.
Through each and all parts of this, I have been true to my Chicago
School roots and to what I thought the data and good economics showed.
My opinions on speculation are the product of my training and my
research, period.
Moreover, completely contrary to the impression in the NYT piece, the
vast bulk of my consulting and testifying work has been adverse
to Wall Street and commodity trading firms. Virtually none of this work
relates to the alleged subject of the NYT story: the impact of
speculation on commodity prices. In fact, much of this work relates to
market manipulation (which is distinct from speculation) by commodity
traders. I have been, and continue to be, on the side of plaintiffs in
attempting to hold traders who abuse markets accountable for their
conduct.
The failure of David Kocieniewski to point out this salient fact
alone betrays his utter unprofessionalism and bias, and is particularly
emblematic of the shockingly shoddy excuse for journalism that his piece
represents.
Moreover, none of the research or writing I have done on the
speculation issue received financial support from any firm or entity
with even a remote stake in this issue. I
started writing about this on my blog in 2006, and have been arguing
this issue on my own time with no financial support from anyone.
Unlike, say,
Ken Singleton (whom I admire immensely and am not accusing of
anything remiss) I have not written any commissioned research on the
subject of commodity speculation. My work that has been done with firms
that are connected, in some way, to commodities trading has been on
subjects unrelated to financial speculation, and/or with firms that are
not financial speculators, and/or took place well after my opinions on
the subject were a matter of public record, including in national
publications like the Wall Street Journal. Therefore, to
suggest some connection between my paid outside work and my opinions on
speculation is misleading, deceptive, and plainly libelous.
True to my Chicago School roots, I believe this is a data issue
informed by a strong understanding of the theory and empirics of
commodity pricing-a literature to which I have made many peer reviewed
contributions. And I have been open and remain open to reviewing any
data on any market. I further note that the vast bulk of other research
on this subject, undertaken by world-class scholars including James
Hamilton and Lutz Killian supports my conclusions (and those of Scott
Irwin). Ironically, considering the where this piece appears, even
Paul Krugman is in agreement.
The simple explanation for my views is that I am avowedly a “super-freshwater
economist” by training and conviction. Because I know that drinking
saltwater makes you go crazy. Kidding aside, my work on speculation is a
piece with all of my academic work, my background, and my training.
Randall Kroszner, former Fed governor, told me once that I was one of
the last true Chicago School economists. That’s a compliment, that’s
pretty accurate, and that’s aspirational. That is a much better
predictor of where I come down on any issue than anything else:
including money.
What’s more, I do not solicit, have never solicited and would not
solicit money for any institution or purpose based upon my views of
speculation or the policy issues relating to speculation. Or any other
issue.
A couple of other points before getting into specifics.
First, there are no coincidences, comrades. The NY Times has been
Tiger Beat effusive in its praise for Gary Gensler of the CFTC. This
piece attacking two of the most prominent academic critics of Gensler’s
efforts to impose a speculative position limits rule comes out days
after the Commission approved a new version of the rule, and is in the
midst of the comment period leading up to the formulation of a final
rule. Gensler fought for this rule for 5 years, and he views it as an
important part of his legacy. That is, there is a clear political
agenda at work here: to kneecap those who have the audacity to oppose
the regulatory agenda of Gensler and his media acolytes.
Second, this kind of ad hominem attack will have the effect
(which is likely intended) of serving as a warning to other academics
who cross powerful political interests with their academic research, and
who have the temerity to speak out on controversial matters. How can
this be seen as anything other than having a chilling effect on other
academic researchers in the the financial and commodity markets? But
maybe that’s exactly the point.
Now some specifics.
- There are many egregious distortions in the article, but the
most egregious is Kocieniewski’s lying by omission. Lying. By.
Omission. Specifically, he omits the salient fact that the bulk of
my consulting engagements (in the form of expert testimony) have
been adverse to commodity traders and banks. I have
testified numerous times about manipulations by these types of
firms, and have testified against them on other matters unrelated to
manipulation.
- Let’s examine some of the firms I have been adverse to in my
work over the past 20 years, shall we? Off the top of my head: BP
(twice); AEP; Ferruzzi (a commodity trading firm); Duke Energy;
Nasdaq market makers; JP Morgan; MetLife; Morgan Stanley; Goldman
Sachs; Cargill; Amaranth (a hedge fund that was one of the largest
speculative-industry players in the country); Moore Capital (one of
the world’s largest hedge funds, and another huge speculative
industry player); Optiver (a major trading firm); Pimco (the world’s
largest fixed income fund); Merrill Lynch (twice); Sumitomo (major
copper trader); Microsoft; Cantor Fitzgerald (twice); and on and on.
A veritable murderers’ row of banksters and traders and energy
firms.
- I say again: by omitting any mention of this work the Times is
lying by omission, and presenting a biased
and extremely distorted picture of me and my work. This biased
selectivity makes a joke of the Times’ motto “all the news
that is fit to print”. Leaving out this salient fact makes it
plain that Kocieniewski and the Times have an agenda, and no
interest in presenting a complete picture of me and my work. The
Times article (inaccurately-see below) lists some of my work on the
side of commodity traders and exchanges to create the impression
that I am their creature, but leaves out the work in which I have
been their fierce antagonist-and in the performance of which I have
contributed to their payment of damages running into the
many hundreds of millions of dollars. This failure to mention
evidence that contradicts his pre-conceived conclusion is shoddy,
dishonest journalism.
- Nowhere in the article does the article point out any mistakes
or inaccuracies in my research or Scott’s, only making it plain that
the problem is that our research does not fit his and the NYT’s
preconceived notions about speculators. I spoke to the reporter for
quite a while. Mostly about the substance of my arguments. None of
that made it into the article, and the reporter wasn’t even able to
find another academic to criticize my arguments (or Scott’s):
there’s no evidence he even tried, suggesting that the substance was
irrelevant to him. The failure to address the substance of my
arguments is very telling. If I am merely advancing some
illegitimate commercial interest, my arguments would be easy to
refute, no? Moreover, Kocieniewski fails to mention my numerous
peer-reviewed publications on commodities. This provides
independent validation (though imperfect, because I have serious
criticisms of peer review) of my work on the behavior of commodity
prices.
- There are several factual errors. Most notably, Kocieniewski claims
I wrote a “flurry” of comment letters on speculation/position
limits. I guess in the NYT Thesaurus, “flurry” is a synonym for
“one.” For I wrote a single comment on the issue: as I noted in an
earlier post, the comment must have had something of an effect
because the CFTC’s new speculative limit proposal eliminates
language I had criticized in my letter. (I also wrote a comment on
the CFTC rule proposal relating to clearinghouse governance. Thus
my “flurry” of comments to the CFTC on Frankendodd totals two
snowflakes.) Also, the article ominously suggests that I simultaneously
had undisclosed “financial ties” to banks and trading firms when I
wrote the study on the systemic risk of commodity trading firms for
the Global Financial Markets Association (GFMA). This is not
correct. I agreed to write a white paper on commodity trading firms
for Trafigura more than a year after writing the GFMA report.
Indeed, the GFMA report led to the Trafigura engagement. Which
again indicates that public revelations of my views typically
precede any paid retention.
- Obviously,
the
story of the GFMA study, which I have discussed earlier on the
blog, demonstrates clearly that my opinions are not for sale, and
that I have stood up to and do stand up to “Wall Street.” I would
specifically note that one thing that I adamantly refused to remove
from that study, despite the insistence of the attorney for JP
Morgan’s commodity trading division, was my statements that
commodity trading firms have been known to manipulate markets.
- Kocieniewski’s’ claim that I somehow conceal my consulting work
by referring to myself “solely as an academic” is refuted by the
biography linked to in his story. That bio includes the
following language, which I include in the bio for every speaking
engagement I undertake: “Professor Pirrong has consulted widely. His
clients have included electric utilities, major commodity processors
and consumers, and commodity exchanges around the world.”
Therefore, Kocieniewski’s characterization of how I represent
myself is deceptive and fundamentally dishonest. I gladly reveal
that I consult because it suggests I might actually know something
about the real world that real people might learn from.
- Kocieniewski’s representations about disclosures are invalidated
by his dishonest handling of chronology. He insinuates that I did
not disclose my work for the CME or commodity trading firms when I
testified before Congress in 2008. But the work for CME Group, GFMA,
Trafigura, etc., that Kocieniewski mentions occurred in 2011 and
later. My disclosures in my testimony were accurate at the time I
made them. But I guess I should have invented a time machine, or
become Karnac the Magnificent and disclosed things that I would do
in the future.
- The Times insinuates that my work for CME, Trafigura, TruMarx
and others is related to the speculation issue, and hence taints my
opinions about this matter. My work for CME has consisted of
evaluating the performance of the WTI contract as
a hedging mechanism and an expert witness engagement regarding a
patent on electronic trading systems: neither has anything to do
with commodity speculation. Trafigura is a physical commodity
trader that uses derivatives almost exclusively to hedge, not
speculate. TruMarx launched a platform to trade physical energy,
primarily between end users: again, nothing to do with financial
speculation. These matters and these companies are not related to
the financial speculation issue, and Trafigura and TruMarx in
particular have no real stake in the speculation debate. Moreover,
my work for them has nothing to do with the speculation issue.
Either Kocieniewski is ignorant of the fact that many commodity
traders are not speculators, in which case he is not competent to be
writing this story, or he is counting on the inability of his
readers to understand the great diversity of firms involved in
commodity markets, most notably the fact that many (most?) are not
speculators, in which case he is attempting to mislead. I know
where I am laying my bets.
- The Times also mis-states facts about Scott Irwin, but that is
mainly for Scott to correct. One particularly egregious thing
stands out which I cannot let pass though. Kocieniewski talks about
the $1.5 million that CME Group donated to the University of
Illinois. But not one cent-one cent-of that went to Irwin’s
Department of Agricultural and Consumer Economics, let alone to
Irwin personally. To say that Kocieniewski’s connection of the
CME’s financial support for the University of Illinois (a $4.4
billion dollar operation) and Scott Irwin is scurrilous is an
extreme understatement.
- See more at: http://streetwiseprofessor.com/?p=7930#sthash.itwAbQZh.dpuf
The New York Times, in
an article written by David Kocieniewski, has
singled out me and the University of Illinois’ Scott Irwin for an extended ad
hominem treatment alleging that our statements and research on commodity
speculation are tainted due to financial connections with “Wall Street.” As
one individual put it to me, the article is “nasty, biased and thinly
researched.” All true (if incomplete-the list of sins is even longer).
But at the risk of providing credence to the incredible, I believe some
sort of response is warranted. So here it goes.
Let me
start by saying I have been very fortunate. I have been able to pursue my
academic passions, publish papers and books on them, and consult and testify
as an expert witness on many matters related to these passions. Through each
and all parts of this, I have been true to my Chicago School roots and to
what I thought the data and good economics showed. My opinions on
speculation are the product of my training and my research, period.
Moreover, completely contrary to the impression in the NYT piece, the vast
bulk of my consulting and testifying work has been adverse to Wall
Street and commodity trading firms. Virtually none of this work relates to
the alleged subject of the NYT story: the impact of speculation on commodity
prices. In fact, much of this work relates to market manipulation (which is
distinct from speculation) by commodity traders. I have been, and continue
to be, on the side of plaintiffs in attempting to hold traders who abuse
markets accountable for their conduct.
The
failure of David Kocieniewski to point out this salient fact alone betrays
his utter unprofessionalism and bias, and is particularly emblematic of the
shockingly shoddy excuse for journalism that his piece represents.
Moreover, none of the research or writing I
have done on the speculation issue received financial support from any firm
or entity with even a remote stake in this issue. I
started writing about this on my blog in 2006,
and have been arguing
this issue on my own time with no financial
support from anyone. Unlike, say,
Ken Singleton
(whom I admire immensely and am not accusing of anything remiss) I have not
written any commissioned research on the subject of commodity speculation.
My work that has been done with firms that are connected, in some way, to
commodities trading has been on subjects unrelated to financial speculation,
and/or with firms that are not financial speculators, and/or took place well
after my opinions on the subject were a matter of public record, including
in national publications like the Wall Street Journal. Therefore, to
suggest some connection between my paid outside work and my opinions on
speculation is misleading, deceptive, and plainly libelous.
True to my Chicago School roots, I believe this is a
data issue informed by a strong understanding of the theory and empirics of
commodity pricing-a literature to which I have made many peer reviewed
contributions. And I have been open and remain open to reviewing any data
on any market. I further note that the vast bulk of other research on this
subject, undertaken by world-class scholars including James Hamilton and
Lutz Killian supports my conclusions (and those of Scott Irwin).
Ironically, considering the where this piece appears, even
Paul Krugman is in agreement.
The simple explanation for my views is that I am
avowedly a “super-freshwater
economist” by training and conviction.
Because I know that drinking saltwater makes you go crazy. Kidding aside,
my work on speculation is a piece with all of my academic work, my
background, and my training. Randall Kroszner, former Fed governor, told me
once that I was one of the last true Chicago School economists. That’s a
compliment, that’s pretty accurate, and that’s aspirational. That is a much
better predictor of where I come down on any issue than anything else:
including money.
What’s
more, I do not solicit, have never solicited and would not solicit money for
any institution or purpose based upon my views of speculation or the policy
issues relating to speculation. Or any other issue.
A
couple of other points before getting into specifics.
First,
there are no coincidences, comrades. The NY Times has been Tiger Beat
effusive in its praise for Gary Gensler of the CFTC. This piece attacking
two of the most prominent academic critics of Gensler’s efforts to impose a
speculative position limits rule comes out days after the Commission
approved a new version of the rule, and is in the midst of the comment
period leading up to the formulation of a final rule. Gensler fought for
this rule for 5 years, and he views it as an important part of his legacy.
That is, there is a clear political agenda at work here: to kneecap those
who have the audacity to oppose the regulatory agenda of Gensler and his
media acolytes.
Second, this kind of ad hominem attack will have the effect (which is
likely intended) of serving as a warning to other academics who cross
powerful political interests with their academic research, and who have the
temerity to speak out on controversial matters. How can this be seen as
anything other than having a chilling effect on other academic researchers
in the the financial and commodity markets? But maybe that’s exactly the
point.
Now
some specifics.
-
There are many egregious distortions in the article, but the most
egregious is Kocieniewski’s lying by omission. Lying. By. Omission.
Specifically, he omits the salient fact that the bulk of my consulting
engagements (in the form of expert testimony) have been adverse
to commodity traders and banks. I have testified numerous times about
manipulations by these types of firms, and have testified against them
on other matters unrelated to manipulation.
-
Let’s examine some of the firms I have been adverse to in my work over
the past 20 years, shall we? Off the top of my head: BP (twice); AEP;
Ferruzzi (a commodity trading firm); Duke Energy; Nasdaq market makers;
JP Morgan; MetLife; Morgan Stanley; Goldman Sachs; Cargill; Amaranth (a
hedge fund that was one of the largest speculative-industry players in
the country); Moore Capital (one of the world’s largest hedge funds, and
another huge speculative industry player); Optiver (a major trading
firm); Pimco (the world’s largest fixed income fund); Merrill Lynch
(twice); Sumitomo (major copper trader); Microsoft; Cantor Fitzgerald
(twice); and on and on. A veritable murderers’ row of banksters and
traders and energy firms.
-
I
say again: by omitting any mention of this work the Times is lying
by omission, and presenting a biased and extremely distorted
picture of me and my work. This biased selectivity makes a joke of the
Times’ motto “all the news that is fit to print”. Leaving out
this salient fact makes it plain that Kocieniewski and the Times have an
agenda, and no interest in presenting a complete picture of me and my
work. The Times article (inaccurately-see below) lists some of my work
on the side of commodity traders and exchanges to create the impression
that I am their creature, but leaves out the work in which I have been
their fierce antagonist-and in the performance of which I have
contributed to their payment of damages running into the many hundreds
of millions of dollars. This failure to mention evidence that
contradicts his pre-conceived conclusion is shoddy, dishonest
journalism.
-
Nowhere in the article does the article point out any mistakes or
inaccuracies in my research or Scott’s, only making it plain that the
problem is that our research does not fit his and the NYT’s preconceived
notions about speculators. I spoke to the reporter for quite a while.
Mostly about the substance of my arguments. None of that made it into
the article, and the reporter wasn’t even able to find another academic
to criticize my arguments (or Scott’s): there’s no evidence he even
tried, suggesting that the substance was irrelevant to him. The failure
to address the substance of my arguments is very telling. If I am
merely advancing some illegitimate commercial interest, my arguments
would be easy to refute, no? Moreover, Kocieniewski fails to mention my
numerous peer-reviewed publications on commodities. This provides
independent validation (though imperfect, because I have serious
criticisms of peer review) of my work on the behavior of commodity
prices.
-
There are several factual errors. Most notably, Kocieniewski claims I
wrote a “flurry” of comment letters on speculation/position limits. I
guess in the NYT Thesaurus, “flurry” is a synonym for “one.” For I
wrote a single comment on the issue: as I noted in an earlier post, the
comment must have had something of an effect because the CFTC’s new
speculative limit proposal eliminates language I had criticized in my
letter. (I also wrote a comment on the CFTC rule proposal relating to
clearinghouse governance. Thus my “flurry” of comments to the CFTC on
Frankendodd totals two snowflakes.) Also, the article ominously
suggests that I simultaneously had undisclosed “financial ties”
to banks and trading firms when I wrote the study on the systemic risk
of commodity trading firms for the Global Financial Markets Association
(GFMA). This is not correct. I agreed to write a white paper on
commodity trading firms for Trafigura more than a year after writing the
GFMA report. Indeed, the GFMA report led to the Trafigura engagement.
Which again indicates that public revelations of my views typically
precede any paid retention.
-
Obviously,
the story of the GFMA study,
which I have discussed earlier on the blog,
demonstrates clearly that my opinions are not for sale, and that I have
stood up to and do stand up to “Wall Street.” I would specifically note
that one thing that I adamantly refused to remove from that study,
despite the insistence of the attorney for JP Morgan’s commodity trading
division, was my statements that commodity trading firms have been known
to manipulate markets.
-
Kocieniewski’s’ claim that I somehow conceal my consulting work by
referring to myself “solely as an academic” is refuted by the biography linked
to in his story. That bio includes the following language, which I
include in the bio for every speaking engagement I undertake: “Professor
Pirrong has consulted widely. His clients have included electric
utilities, major commodity processors and consumers, and commodity
exchanges around the world.” Therefore, Kocieniewski’s characterization
of how I represent myself is deceptive and fundamentally dishonest. I
gladly reveal that I consult because it suggests I might actually know
something about the real world that real people might learn from.
-
Kocieniewski’s representations about disclosures are invalidated by his
dishonest handling of chronology. He insinuates that I did not disclose
my work for the CME or commodity trading firms when I testified before
Congress in 2008. But the work for CME Group, GFMA, Trafigura, etc.,
that Kocieniewski mentions occurred in 2011 and later. My disclosures
in my testimony were accurate at the time I made them. But I guess I
should have invented a time machine, or become Karnac the Magnificent
and disclosed things that I would do in the future.
-
The Times insinuates that my work for CME,
Trafigura, TruMarx and others is related to the speculation issue, and
hence taints my opinions about this matter. My work for CME has
consisted of
evaluating the performance of the WTI contract
as a hedging mechanism and an expert
witness engagement regarding a patent on electronic trading systems:
neither has anything to do with commodity speculation. Trafigura is a
physical commodity trader that uses derivatives almost exclusively to
hedge, not speculate. TruMarx launched a platform to trade physical
energy, primarily between end users: again, nothing to do with financial
speculation. These matters and these companies are not related to the
financial speculation issue, and Trafigura and TruMarx in particular
have no real stake in the speculation debate. Moreover, my work for
them has nothing to do with the speculation issue. Either Kocieniewski
is ignorant of the fact that many commodity traders are not speculators,
in which case he is not competent to be writing this story, or he is
counting on the inability of his readers to understand the great
diversity of firms involved in commodity markets, most notably the fact
that many (most?) are not speculators, in which case he is attempting to
mislead. I know where I am laying my bets.
-
The Times also mis-states facts about Scott Irwin, but that is mainly
for Scott to correct. One particularly egregious thing stands out which
I cannot let pass though. Kocieniewski talks about the $1.5 million
that CME Group donated to the University of Illinois. But not one
cent-one cent-of that went to Irwin’s Department of Agricultural and
Consumer Economics, let alone to Irwin personally. To say that
Kocieniewski’s connection of the CME’s financial support for the
University of Illinois (a $4.4 billion dollar operation) and Scott Irwin
is scurrilous is an extreme understatement.
-
See more at:
http://streetwiseprofessor.com/?p=7930#sthash.itwAbQZh.dpuf
PS
Paul Krugman at one time made a fortune consulting for Enron while he was a
tenured professor at Princeton University. Now he's a hero of the New York
Times writing a blog column for the NYT.
Paul Krugman ---
http://en.wikipedia.org/wiki/Paul_Krugman
. . .
Krugman's columns have drawn criticism as well as praise. A 2003 article in
The Economist[111]
questioned Krugman's "growing tendency to attribute
all the world's ills to
George Bush," citing
critics who felt that "his relentless partisanship is getting in the way of
his argument" and claiming errors of economic and political reasoning in his
columns.[81]
Daniel Okrent, a former The New York Times
ombudsman, in his farewell column, criticized
Krugman for what he said was "the disturbing
habit of shaping, slicing and selectively citing numbers in a fashion that
pleases his acolytes but leaves him open to substantive assaults."[11
"Why Was Paul Krugman So Wrong?" by William Greider, The Nation,
Date Unknown ---
http://www.thenation.com/article/173593/why-was-paul-krugman-so-wrong#
. . .
In recent years, as the global system broke down,
Krugman had less to say about international trade theory, his academic
specialty, because he directed his wrath mostly at conservative Republicans
demanding balanced budgets. But for many years Krugman made it his personal
duty to act as the watchdog warning the public against non-economists
peddling false ideas. In practice, this usually meant skewering progressive
writers who criticized globalization from a liberal-labor perspective—offshoring
of jobs, stagnating wages, sweatshops and all that.
Krugman was notorious among opponents for a snide
polemical style. An old friend, another liberal author, once confided to me
that he had “inoculated” his own forthcoming book against a blistering
Krugman review. He attacked Krugman in print first, which effectively
disqualified Krugman as a potential reviewer.
So Krugman chewed on my new book instead—One
World, Ready or Not: The Manic Logic of Global Capitalism—which
he described as “a thoroughly silly book.” He made a nasty campaign against
it,
first on Slate,
Microsoft’s online magazine, next a harsh review
in The Washington Post, then
again in his book entitled The
Accidental Theorist. I have to admit it. In
Krugman’s telling, I did sound like a drooling idiot
Cotinued in article.
Jensen Comment
I have to admire Professor Krugman for being an equal opportunity critic. I
think he was correct in the case of the book mentioned above. I think he was
correct in the case of the WSJ article mentioned below, although in the latter
case I have to ultimately agree with Bret Stephens.
"About Those Income Inequality Statistics An answer to Paul Krugman,"
by Bret Stephens, The Wall Street Journal, January 3, 2014 ---
http://online.wsj.com/news/articles/SB10001424052702304325004579298502492870522?mod=djemEditorialPage_h
Let me do something
New York Times
NYT -0.13% columnist
Paul Krugman isn't exactly famous for doing, at
least not graciously: acknowledge a mistake.
In my Dec. 31 column on income inequality, I used a
data set from the U.S. Census Bureau to make the case that incomes in the
U.S. have been growing across the board, even if the incomes of the wealthy
have grown faster than those of others further down the income scale. But I
wrote those lines looking at a set of numbers that had not been adjusted for
inflation.
Professor Krugman, in a post on his New York Times
blog, takes me to task for this. Had I done so looking at the
inflation-adjusted table, it would have shown the incomes of the bottom 20%
essentially stagnating since 1979 (and long before then, too), though it
also would have shown incomes for the top 20% rising far less dramatically.
That was an error, roughly of the kind the Nobel
Laureate economist made last August when he confused an x for a
1/x. As is his charming wont, Mr. Krugman accuses me not of making an
honest mistake, but of "pulling a fast one."
My mistake is all the more unfortunate because
the basic point I was making is right: Americans are getting richer across
the entire income spectrum, even if they are getting richer at very
different rates. That much is confirmed by data from the Congressional
Budget Office. The CBO finds that between 1979 and 2007 income for poor
households grew by 18%, for the middle classes by nearly 40%, and for the
top 81-99% by 65%. It's the top 1% who have made out very handsomely, with a
jump of 275% over nearly three decades.
The difference between the Census Bureau and CBO
data comes down to the complicated (and ultimately subjective) way in which
"income" is defined. The Census Bureau data relies on a definition of income
that is pre-tax but post-transfer cash income. But it also excludes the
non-cash benefits that go to many of the poor, such as food stamps,
Medicaid, CHIP (children's Medicaid) and housing subsidies. (and now
more free or subsidized medical care and medications)
By contrast, the CBO numbers measure after-tax,
after-transfer income. It also includes non-cash transfers. Those benefits
may not be fungible, but they do have value. And they vindicate my core
point: "The richer have outpaced the poorer in growing their incomes, just
as runners will outpace joggers who will, in turn, outpace walkers." What
mattered, I said, was that "the walking man walks."
My column also noted that President Obama erred
when he said the top 10% take half of aggregate income; in fact, it's the
top 20% who take half the income, according to Census Bureau data. Mr.
Krugman takes issue with this, too, saying the Census Bureau figures are
pretty much worthless when it comes to quantifying the aggregate incomes of
the very rich. Much better, he says, is data from a controversial study by
two left-wing French economists, Emmanuel Saez and Thomas Piketty, which is
in line with President Obama's contention.
Talk about a fast one. As Greg Mankiw, chairman of
the Harvard Economics department, notes, Saez-Piketty has its own set of
very large problems: "The data are on tax units rather than households, they
do not include many government transfer payments, they are pre-tax rather
than post-tax, they do not adjust for changes in household size, and they do
not include nontaxable compensation such as employer-provided health
insurance."
Ultimately, debates about income inequality are
never going to be settled because both "income" and "inequality" are very
hard to measure. Is the best measure of inequality wage inequality,
income inequality, or consumption inequality? If a poor family today can now
afford a car, an air conditioner, a computer and other goods unaffordable or
unavailable to the poor of 35 years ago, can they really be said to have
stagnated economically? How do changes in the tax code affect the ways in
which income can be reported, sheltered and measured? What is the true money
value of health insurance?
And so on and on. The argument I made in my column
is that inequality should only matter to Americans if, Russia-like, the rich
are getting richer at the expense of the poor.
Neither the Census Bureau nor the CBO figures show
that.
None of this is to excuse the fact that I goofed in
my use of data. My apologies. As for Mr. Krugman, he should bear in mind
something the public editor of the New York Times once said about him: "Paul
Krugman has the disturbing habit of shaping, slicing and selectively citing
numbers in a fashion to please his acolytes but leaves him open to
substantive assaults."
Over 3,000 Cuban doctors defected from Venezuela in 2013: Most Cuban
doctors defecting to the US over the last 12 months came from Venezuela, ---
http://www.eluniversal.com/nacional-y-politica/131228/over-3000-cuban-doctors-defected-from-venezuela-in-2013
Over the last 12 months some 3,000 Cubans, mostly
doctors, have arrived in the United States after deserting one of the
Venezuelan government's social programs they staff. This accounts for a 60%
increase as compared with 2012.
In 2012 there were about 5,000 refugee Cuban
doctors and nurses in the United States coming from all over the world.
Through December 1, 2013 this figure had surged to 8,000, 98% of them came
from Venezuela.
These are estimates by Dr. Julio Cesar Alfonso,
head of the South Florida group Solidarity Without Borders Inc. (SWB), which
helps Cuban medical professionals who try to desert the medical programs
Havana sells worldwide as "exports of services."
Venezuela hosts the largest contingent of Cuban
medical professionals under the cooperation agreement signed by Caracas and
Havana in 2003.
By 2012, 44,804 Cubans staffed the seven social
programs starting in 2003, according to the last official data released.
"In 2012 we had 5,000 refugee medical professionals
in the United States under federal assistance, but that figure has surged so
far in 2013 reaching 8,000 doctors, 98% of whom defected from Venezuela
because of continuously worsening conditions in that country," Alfonso says.
"Most Cubans who have defected complain about
low salaries, late payment, increased workload in the Barrio Adentro
neighborhood clinics and CDIs (Comprehensive Diagnostic Centers) across
Venezuela, which to some critics amounts to modern-day slavery," Alfonso
says.
"Cuban doctors only get USD 300 a month, but the
Venezuelan government pays the Castro regime around USD 6,000 per doctor, so
individual doctors are paid less than 10% of what Cuba collects," Alfonso
says.
Since 2006, Cuban doctors and some other health
workers who are serving their government overseas are allowed to request a
United States visa under the Cuban Medical Professional Parole (CMPP)
Program.
After requesting assistance from the US Embassy in
Caracas, most doctors defect to the United States via Colombia, but Brazil
is also being used as an alternative transit route to freedom.
Cuban medical professionals are required to
produce numerous patient records for the purposes of drafting reports, many
of which contain patient data that have been tampered with.
"This is done so that Cuba can show positive
reports to the Venezuelan government," Alfonso says.
Jensen Comment
Cuba and Venezuela have done more than nearly all other nations have done more
to eliminate income inequality than other nations. Contrary to the lies you hear
from Michael Moore, their efforts do not appear to be healthy. Soon the U.S. and
parts of Europe may be getting an influx of very skilled French physicians.
"We Can’t Afford to Leave Inequality to the Economists," by Justin
Fox, Harvard Business Review Blog, January 24, 2014 ---
http://blogs.hbr.org/2014/01/we-cant-afford-to-leave-inequality-to-the-economists/
Americans are about as likely to move from one
income quintile to another as they used to be. That, put as prosaically as
possible, was the big economic news of the week, as the
epic
income-mobility study led by Harvard’s Raj Chetty
and Nathaniel Hendren, UC Berkeley’s Patrick Kline and Emmanuel Saez, and
the U.S. Treasury Department’s Nicholas Turner generated
another data-rich installment.
Yet when it comes to the income distribution in the
U.S., quintiles are so 1970s. All the really interesting things over
the past few decades have been happening in the top 20%. Consider this
chart, which shows the share of aggregate income going to each of the bottom
four income quintiles, to those between the 80th and 95th income
percentiles, and to the top 5%.
The lines for the bottom four quintiles — 80% of
American households — are pretty much parallel, showing almost no change in
their relative positions. If you just look at the bottom 80% of the income
distribution, then, there’s been no significant increase in income
inequality. You do see a steady decline in the share of national
income going to the bottom 80%, but in absolute terms, incomes for this
group are up modestly over the same period.
Things look a lot different up in the top 20% of
the income distribution, the part that’s been getting a rising share of
aggregate income. The bottom three-quarters of this quintile (those between
the 80th and 95th income percentiles) have grabbed some of that, but the
really big gains have gone to the top 5%.
And of course it doesn’t stop there. The
Census Bureau survey data used in the above chart
doesn’t get more granular than the top 5%. But the aforementioned Emanuel
Saez, together with Thomas Piketty of the Paris School of Economics, has for
the past decade-plus been using income tax records to compile a rich account
of what’s been going on up there in the top 1%. You’re probably familiar
with the basic outlines, but it’s worth throwing out a few numbers from
their
most recent update:
- From 1993 to 2013, incomes of the bottom 99%
of taxpayers in the U.S. grew 6.6%, adjusted for inflation. The incomes
of the top 1% grew 86.1%.
- The top 0.1% of U.S. taxpayers claimed 11.33%
of overall income in 2012, up from 2.65% in 1978. The top 0.01% got
5.47%, up from 0.86% in 1978.
- The average income of the top 0.01% was 859
times that of the bottom 90% in 2012. In 1973 the
top-0.01%-to-bottom-90% ratio was just under 80.
Something really dramatic is going on up there in
the top 5%, the top 1%, the top 0.01%. But while economists know some things
about the impact of increasing overall income inequality, they still don’t
know all that much about what this 1% stuff means. In their new paper,
Chetty, Hendren, Kline, Saez, and Turner write that their finding of steady
intergenerational income mobility “may be surprising in light of the
well-known negative correlation between inequality and mobility across
countries.” A possible explanation, they continue, is that
[M]uch of the increase in inequality has been
driven by the extreme upper tail … [and] there is little or no
correlation between mobility and extreme upper tail inequality — as
measured e.g. by top 1% income shares — both across countries and across
areas within the U.S. Instead, the correlation between inequality and
mobility is driven primarily by “middle class” inequality.
That’s the thing about this rise in “extreme upper
tail inequality” — most pronounced in the U.S. but by now a clearly
global phenomenon. It
is one of the most dramatic economic developments of the past quarter
century. And it seems like it might be bad thing. But conclusive
economic evidence for its badness is hard to find.
Yes, there are theories: All that wealth sloshing
around in the top 1%
leads to more bubbles and crashes. Extreme wealth
corrupts the political process. Income inequality
may be
slowing overall economic growth. And, as my
colleague Walter Frick put it in an email when I brought this up, “given the
diminishing marginal utility of income, it’s hugely wasteful for the super
rich to have so much income.”
I happen to believe there’s some truth to all four
of those. But there are also lots of
counterarguments and some
counterevidence,
and big economic studies like the new one by Chetty &
Co. don’t seem to be doing much to resolve the debate.
Continued in article
Jensen Comment
Like most analysts Professor Fox totally ignores the $2 trillion annual
underground economy where many of the poor and middle class take refuge and add
an enormous amount of error to inequality databases, including US Census data.
http://www.cs.trinity.edu/~rjensen/temp/TaxNoTax.htm
"The Vacant School Buildings That Made Milwaukee Infamous: The city
would rather spend $1 million a year on upkeep than let charters buy the
abandoned structures," C.J. Szafir, The Wall Street Journal, January
24, 2014 ---
http://online.wsj.com/news/articles/SB10001424052702303448204579340691184947058?mod=djemMER_h
Milwaukee city officials, from the Common Council
to the school board, are working together to block high-performing private
and charter schools from buying the vacant, unused school buildings that the
city owns. Their stubborn negligence is costly for the taxpayers. It is even
more costly for the city's children.
Milwaukee's public schools are in crisis. It is
Wisconsin's only failing school district, according to the state's school
report cards. Just 16% of fourth-graders in the district public schools are
proficient in reading and only 4% of black eighth-graders can do math at an
acceptable level as measured by the National Assessment of Educational
Progress. Only 62% of high-school students graduate in four years.
One alternative for parents is school choice. More
than 25,000 low-income children in Milwaukee take advantage of a
state-government-provided scholarship of $6,442 to select a school that best
meets their individual needs. In theory, this would allow the
high-performing schools—whether they are private, charter or traditional
public—to prosper, and the failing schools to close. The program, which
began in 1990 as the Milwaukee Parental Choice Program, is gaining
popularity and, last year, was expanded statewide by the legislature to
include 500 more students.
But teachers unions, state bureaucrats and the far
left have campaigned for years to shut down the school-choice program and
preserve the public-school monopoly. Opponents have labeled the program as
"morally wrong" and baselessly accused the participating private schools of
discrimination. They've also sued the state, claiming the program was an
illegal use of taxpayer money, a violation of the Constitution's prohibition
of an establishment of religion, and unconstitutionally hurt the public
schools. All of these attempts failed. Now they are trying to block schools
in the choice program from expanding.
In 1998, there were about 98,185 enrolled in
Milwaukee's public schools. Today, there are roughly 71,304 students
enrolled, while more than 35,000 children attend a school outside the
public-school system. The result: According to its records, the city
currently owns at least 15 unused school buildings, which cost taxpayers
more than $1.4 million each year to maintain.
These buildings do not have to sit idle. A recently
released report by the Wisconsin Institute for Law & Liberty concluded that,
based on school district records and interviews, private and public charter
schools have inquired about purchasing or leasing nearly every one of them.
Instead, Milwaukee, in an arbitrary administrative
policy, prohibits private schools in the choice program and for-profit
public charters from purchasing or leasing empty school buildings. For the
few abandoned buildings that have been sold, the school district has slapped
a restrictive deed on the buildings to prevent the buyer from ever selling
them to a choice school.
The monopoly mind-set behind this policy was
eloquently expressed by Milwaukee Public Schools Board President Michael
Bonds. When asked by the Milwaukee Journal Sentinel about a proposal to
compel Milwaukee Public Schools to sell their unused buildings to choice
schools, he proclaimed that it would be "like asking the Coca-Cola KO -1.02%
Company to turn over its facilities to Pepsi so Pepsi can expand and compete
with the Coca-Cola Company."
St. Marcus, a private Lutheran school in the choice
program, has cracked the code for urban-education success. Even though 90%
of its 730 students are from low-income families, more than 91% graduate
from high school in four years or less.
Last summer, St. Marcus offered more than $1
million to purchase an abandoned school building, Malcolm X, conveniently
located on the same block as its main campus. St. Marcus would also invest
more than $5 million into the neighborhood, hire hundreds of staff and, most
importantly, provide 600 new children with a top-quality education. It was
rebuffed. Milwaukee's deputy commissioner of the Department of City
Development sent an email to St. Marcus stating, coldly: "Choice schools are
not eligible to purchase vacant MPS property."
Instead, in November 2013, the Common Council
approved undefined plans to sell Malcolm X, which has been vacant for six
years, to private developers for commercial, residential and educational
purposes, with Milwaukee Public Schools retaining the ability to buy it
back.
Continued in article
From the CFO Journal's Morning Ledger on February 3, 2014
U.S. companies are spending a lot more time
explaining how they’re navigating the financial turmoil in Latin America.
During 3M‘s
conference call with analysts last week, Venezuela proved to be a bigger
talking point than China, even though the company’s Chinese sales are about
20 times its Venezuelan sales,
the
WSJ’s James R. Hagerty and Robert Tita report.
Weakness in Latin America helped hold 3M’s Q4 sales
growth slightly below Wall Street expectations. CFO David Meline told
analysts that the company’s sales declined in Venezuela last year, and that
the company is trying to minimize its currency exposure there. 3M has “a
little less” than $200 million of annual sales in Venezuela and a similar
amount in Argentina, he said. One worry is that 3M’s Venezuela subsidiary
owes $40 million to the parent company for imported goods, Mr. Meline said,
adding: “That is something that we are watching and managing quite
carefully, because we do recognize that there is risk there that we are
going to have to manage through.”
Companies should avoid relying on income from
Latin American subsidiaries to repay dollar-denominated loans, said Michael
Feder, a managing director at business consulting firm AlixPartners. If
Latin American currencies continue to weaken, such loans will be more
expensive to repay. “There’s no hedging policy that people can use to offset
the significant risk of inflation or the risk of currency devaluation,” said
Mr. Feder. His advice: “Focus on making these operations as self-sufficient
as they can be.”
CNH
Industrial, the world’s second-largest seller
of farm machinery behind Deere, reported last week that unfavorable currency
movements turned what would have been a 4.2% increase in fourth-quarter
revenue from a year earlier into a 1% decline, to $9.34 billion. Brazil is a
major market for CNH, and the weakening of the Brazilian real cut the value
of those sales in dollar and euro terms. “We had very good performance in
Latin America,” said CEO Richard Tobin. “Unfortunately, we’re losing some of
it in foreign exchange coming back.”
"You Should Read Paul Krugman On The Emerging-Market Turmoil," by Joe
Weisenthal, Business Insider, February 2, 2014 ---
http://www.businessinsider.com/paul-krugman-on-em-2014-2
From the CFO Journal's Morning Ledger on January 24. 2014
Investors flee developing countries
Investors are dumping currencies in emerging markets, underscoring
growing anxiety about the ability of these countries to prop up their
economies as they face uneven growth,
the WSJ reports.
The emerging-market slide reflects worries about
outside forces—such as a shift in U.S. monetary policy, or China’s efforts
to reorient its economy—colliding with domestic political and economic
tensions, unsettling investors at home and abroad. The current situation
puts the central banks of developing countries in a squeeze. If they raise
interest rates to curb currency losses and fight inflation, that would also
tighten the spigot of credit and slow domestic economic growth. But a
failure to raise rates at the right time can diminish the central bank’s
credibility.
The Emerging Market Currency Bloodbath In One Horrific Chart ---
http://www.businessinsider.com/chart-emerging-market-currency-weakness-2014-1
Treasury explains how "MyRA" retirement accounts work ---
http://www.smartbrief.com/01/29/14/treasury-explains-how-myra-retirement-accounts-work-5#.Uu-pzLRjU3g
"MyRAs - Washington's Latest Scam," by Star Parker, Townhall,
February 2, 2014 ---
http://townhall.com/columnists/starparker/2014/02/03/myras--washingtons-latest-scam-n1787716?utm_source=thdaily&utm_medium=email&utm_campaign=nl
. . .
If handled correctly, the State of the Union should
be like the annual report of a corporate chief executive to shareholders. It
should convey key information so that stakeholders know what’s going on.
But that’s not what happens. This isn’t about
informing stakeholders. It’s about political calculations and pitching a
laundry list of proposals, invariably with wonderful benefits, and rarely
any perceivable costs, designed to make the President and his party look
good.
President Obama introduced in this year’s State of
the Union address his proposal to create new retirement accounts for, in the
words of the White House, “the millions of low and middle-income households
earning up to $191,000.” What they are calling “MyRAs.”
How could enhancing retirement savings not be a
good idea? And, even better, it is a free lunch. Again in the words of the
White House, “the account balance will never go down in value” and will be
totally secure because it will be “backed by the U.S. government.”
President Obama is creating these accounts with the
greatest of ease, without even a new law from Congress, by doing what he has
done better than any president in American history. Drive the U.S.
government into debt.
These wonderful new retirement accounts will
receive bonds from the U.S. Government. And who guarantees them?
Please, dear reader, if you are a U.S. taxpayer,
look in the mirror and say “me.”
If the State of the Union was really about the
president informing Congress and the nation, he would have reported the
following from the recent 2013 Long-Term Budget Outlook report of the
Congressional Budget Office:
“Federal debt held by the public is now about 73
percent of the economy’s annual output…higher than at any point in U.S.
history, except a brief period around World War II, and it is twice the
percentage at the end of 2007.”
“CBO projects,” the report continues, “that federal
debt held by the public would reach 100 percent of GDP by 2038….even without
accounting for the harmful effects that growing debt would have on the
economy.”
Meanwhile, as President Obama uses U.S. government
bonds to create magical new risk-free retirement savings accounts, there was
not a word in the State of the Union of the broken state of affairs of the
government’s oldest retirement plan – Social Security.
According to Social Security’s latest trustees
report, the revenue shortfall, in today’s dollars, of projected requirements
of Social Security to meet its long-term obligations is $9.6 trillion.
Beginning in 2033, when those now in their late forties start retiring,
there will be only funds “sufficient to pay 77 percent of scheduled
benefits.”
If the president really wants to enhance retirement
savings of low and middle income Americans, and create real savings and
investment while addressing the fiscal disaster of Social Security, let
these folks opt out of the Social Security black hole and use those funds to
open a real retirement account.
This is what was done in Chile and it worked. The
Chilean economy grew because the new retirement accounts directed
investments into the real economy (as opposed to creating more government
debt) and Chilean workers have achieved real returns and newly created
wealth.
Wouldn’t it be novel if the president really
reported on the State of the Union each year and if we solved our existing
problems before creating new ones?
"MyRAs Are the Wrong Way of Helping Ordinary People Save Money," by
Daniel J. Mitchell, Townhall, February 3, 2014 ---
http://finance.townhall.com/columnists/danieljmitchell/2014/02/03/myras-are-the-wrong-way-of-helping-ordinary-people-save-money-n1788645?utm_source=thdaily&utm_medium=email&utm_campaign=nl
. . .
There are some good features to the MyRA plan, most
notably the fact that money in the accounts would be protected from double
taxation. Workers would put after-tax money in the accounts, but there would
be no additional layers of tax on any earnings, or when the money is
withdrawn.
In other words, a MyRA would be akin to a
back-ended (or Roth) IRA.
But there are some bad features, including the fact
that taxpayers would be subsidizing the earnings, or interest, paid to
account holders (though this would be a relatively benign form of government
spending, at least compared to Obamacare, ethanol, etc, etc).
My biggest complaints, though, are the sins of
omission, which I discuss in this interview for Blaze TV.
Simply stated, if Obama was concerned about low
returns for savers, he should be directing his ire at the Federal Reserve,
which has artificially pushed interest rates to very low levels as part of
its easy-money policy.
But more importantly, MyRAs will be very inadequate
for most workers with modest incomes. If the President really wanted to help
ordinary people save for retirement, he would follow the successful example
of more than 30 other nations and allow workers to shift their payroll taxes
into personal retirement accounts.
Critics say it would be very expensive to make a
transition to this modern system, and they’re right. If we let younger
workers put their payroll taxes in a personal accounts, we’ll have to come
up with a new source of revenue to finance benefits being paid to current
retirees and older workers.
And we’re talking lots of money, as much as $7
trillion over the next few decades.
But that’s a lot less than
the $36 trillion cash shortfall that we’ll have to
somehow deal with if we maintain the current system.
In other words, we’re in a very deep hole. But if
we shift to personal retirement accounts, the hole won’t be nearly as large.
P.S. The video mentions that Chile and Australia
deserve special attention.
Click here if you want to learn about Chile’s
successful system and
click here if you
want to see how Australia’s “superannuation” system has been a big winner.
Continued in article
Bob Jensen's threads on entitlements ---
http://www.trinity.edu/rjensen/Entitlements.htm
"What I Learned Fighting Poverty in Little Rock It was 1964 and I was a
liberal confident that society could be greatly improved by large infusions of
money," by Joseph Epstein, The Wall Street Journal, January 17, 2014
---
http://online.wsj.com/news/articles/SB10001424052702303465004579322472414255330?mod=djemMER_h
With all the talk currently being bruited about the
50th anniversary of the war on poverty, I am reminded that for a year,
between 1964 and 1965, I was the director of the antipoverty program of
Pulaski County, Ark., which included Little Rock, the adjoining city of
North Little Rock and the surrounding rural area. I was then 27 years old,
appropriately left-wing, and confident that society could be greatly
improved with the help of large infusions of money and the serious thinking
of people like myself.
My only qualification for directing a local
antipoverty program was that a few months before I had been approached for
the job I had published an article in Harper's magazine about urban renewal.
The article was roughly 6,000 words, and my total knowledge of the subject
was perhaps 8,000 words. Based on that article, I was, for four or five
months, one of the leading housing experts in America.
Nobody at the time was much of an expert on
poverty. The main book on the subject was Michael Harrington's "The Other
America: Poverty in the United States" (1962). Harrington's book was less a
study than an exhortation; its argument was that in a society so affluent as
ours, poverty was an egregious sin.
The population of Pulaski County was roughly a
quarter of a million. I had on my staff a secretary and three assistants who
had the title of "field workers." Two field workers were young black men,
the third was an older (than I or they) and remarkable woman named Ruth
Arnold, whose model of a good society was an integrated one, which was—and
remains—mine.
The way money in the antipoverty program worked was
that the local community put up 10% of the sum they asked of the federal
government; the 10% could also be "in kind." This meant that one could
charge off office space, desks and chairs and stationery and anything else
to count toward the 10%. My salary as director was $10,000.
One of the first things I did was attempt to work
out a map illustrating Pulaski County's "pockets of poverty." Little Rock
and North Little Rock had blocks and blocks of shotgun houses—a straight
shot from the front door to the back—still without indoor plumbing. I
remember remarking to a female black schoolteacher, with the heavy irony
available to the ignorant, that shabby as these houses were, almost all of
them had television sets. "Please don't knock those television sets," she
said. "They give these children the only chance they will ever have to hear
decent English."
Some of the programs Washington wanted us to
administer were fairly exotic. A number of others were merely silly. I
remember one called "Foster Grandparents," in which the elderly would be
paid to baby-sit the children of officially poor mothers who could then go
off to work. Rubbing up against human nature, the program failed to
recognize that the elderly do not necessarily long for the company of the
very young, or vice versa.
Many of the shotgun houses I visited were inhabited
by black single mothers with multiple kids. I attempted to explain all the
good things the antipoverty program would do for them and their families. I
also gave talks about poverty to middle-class women's groups, informing them
that there were children in Harlem who had never seen an orange. The women's
eyes teared up. I spoke in black churches, quoting arid statistics on
poverty to which men in the audience would chant, "Tell it, brother."
Around this time the civil-rights movement was well
under way. I used to hang out with members of SNCC, the acronym for the
Student Non-Violent Coordinating Committee. I taught the SNCC people how
they might apply for federal funds to get out the black vote.
I had genuine regard for those SNCC members who
were not merely doing left-wing tourism but were in the movement full-time.
Many had participated in protest marches in Alabama, Louisiana and
Mississippi, and paid for it by having local police billy clubs smashed over
their heads and being attacked by German shepherds.
I spent some time with one of the leaders of the
Little Rock SNCC organization, a man named Bill Hansen, who had put in time
in some of the worst jails in the South. We once had lunch together in a
dingy restaurant in the black district. I picked up the check. Hansen put
three quarters on the table for a tip. "You know, Bill," I said, " Trotsky
never tipped." He picked up the quarters.
As antipoverty program director, I decided to set
up fundamental programs: Head Start, the preschool program for poor kids;
legal aid; and birth-control counseling. I left Little Rock and the
antipoverty program before they were put into effect.
Not long before I decided to return home to
Chicago, I received a phone call from a young woman at SNCC inviting me to
join a mass protest at the Arkansas capitol building. I told her that if I
were to do so my usefulness as a government representative would be at an
end. "You're either with us or against us. You decide," she said, and hung
up.
For a while after I left Little Rock for Chicago I
kept in touch by phone with Ruth Arnold, who told me that things were
fizzling out with the local antipoverty program. Middle-class children were
now increasingly going to preschool, which effectively wiped out any true
head-start that poor children might have obtained. The poor used legal aid,
not to sue the city and the school board, as political-minded antipoverty
workers had hoped, but mainly to sue one another: for divorce, debt
collection, paternity. As for birth-control counseling, who knew or could
know for years to come what its effects would be.
I've not been back to Little Rock for decades, but
my guess is that little has changed for the poor since my days as director
of the antipoverty program there. The poverty in Pulaski County, make no
mistake, was and is real. Only the ways of dealing with it remain in the
realm of fantasy.
Mr. Epstein is the author,
most recently, of "Essays in Biography" (Axios Press, 2012).
"The Great Mom & Dad Experiment The federal government has spent nearly a
billion dollars to help poor couples stay together—with almost nothing to show
for it. So why aren't we pulling the plug?" by Tom Bartlett, Chronicle
of Higher Education's Chronicle Review, January 20, 2014 ---
http://chronicle.com/article/The-Great-Mom-Dad-Experiment/144027/?cid=cr&utm_source=cr&utm_medium=en
. . .
You might think such a harsh assessment would spell
the end of relationship education for the poor. But that isn't the case. The
effort, which grew out of welfare reform under President Clinton, got its
start under President Bush, and has been enthusiastically embraced by
President Obama, enjoys broad bipartisan support. For the left, it's a shot
at leveling the playing field. For the right, it's about strengthening
families. For researchers who study families and relationships, it's a
chance to watch their theories play out on a grand stage. And for
organizations that run the programs, it is a significant source of income.
Plus it just feels right. Spend time with these
couples—the teenage mother with a newborn on her shoulder, the middle-aged
dad dangling his keys just beyond his infant's reach—and you can't help but
root for them and for relationship education. Here is a way to help that
goes beyond a handout. Here is a way to change the world, one couple at a
time. As Mary Myrick, director of the Oklahoma program puts it: "Who could
be against this?"
Matthew D. Johnson, for one. Not that he's against
helping poor couples or even necessarily against relationship education. In
fact, Johnson, an associate professor of psychology at Binghamton University
and director of its Marriage and Family Studies Laboratory, examines why
marriages fall apart and what can be done to keep people together. This is
the stuff he cares about. And he started out believing that these programs
were worthwhile. "I thought this would work," he says. "I wanted to apply
these interventions to these populations." It made sense to him, and he
eagerly awaited the results.
Now, as he sees it, the numbers are in, and they're
terrible. Attempts to spin the data as anything other than a train wreck
strike him as "optimistic or quixotic." "My bias is science and data,"
Johnson says. "I look at these data and say, 'They're not working.'"
Johnson wrote an article published last spring in
American Psychologist making essentially that case. In the genteel,
acronym-laden language of academic discourse, Johnson pretty much accused
scholars who argue for continuing these programs of closing their eyes and
pretending that the whole thing wasn't a bust. Even before the latest
results were released, Johnson had argued in a 2012 paper that the programs
were underperforming and perhaps ill-conceived. "For all of the energy
invested in this issue, the outcomes thus far are unacceptable," he wrote.
"There are clearly many new initiatives and interventions that are being
implemented, but too few of them are built on solid science or are
quantitatively tracking their success."
Continued in article
Jensen Comment
To add the misery some of the comments following this article are an
embarrassment to the Academy. Political and religious hate runs so deep even in
our Academy.
The big problem is that so many of these social experiments either fail
completely or hardly can be justified on by benefit/cost ratios. Reasons abound
including missing variables that impact behavior in combination. Who knows what
will jolt a rare total change in behavior such as that jolt that turns an
uncaring parent into an all-caring parent?
My field is accounting, and accountants generally account for the dollars. We
tend to abhor wasted resources. I could glibly say drop the program and find
something better, But these researchers are pros. If they had any idea what
programs might be better those programs would be in place by now.
Societies are changing so dramatically where the institution of marriage and
parental responsibility is on the decline. We could argue fruitlessly as to what
caused this decline. Certainly there has been times in history like the Dark
Ages where parents endured poverty a thousand times worse. These are nothing
like the Dark Ages and yet programs to help develop better relationships are
less successful than such programs would have been in the Dark Ages.
We should not just give up and build a hire wall between us and them.
This makes me want to see some data how many of those marriages in the Viet
Nam era turned out where couples stood in long lines in Las Vegas and elsewhere
to be married because married men could avoid the draft by being married. I
suspect that many of those who stood in line are now doting grandparents.
Perhaps we should bring back the selective service draft of single men and
women below the poverty line. Instead of inducting men and women for the armed
forces, we could send them into poverty areas in the USA with the assignment to
help the poor find better relationships and loving families. Maybe some of them
would find themselves in the process.
"Whistling Past the Wind Farm Europe abandons country-by-country CO2
emissions targets," The Wall Street Journal, January 23, 2014 ---
http://online.wsj.com/news/articles/SB10001424052702303947904579338253880436492?mod=djemMER_h
President Obama and his allies keep saying that a
major second-term priority is to expand subsidies and mandates to produce
alternatives to carbon energy, so they must not be watching Europe. On
Wednesday the European Commission abandoned country-by-country targets for
greenhouse-gas emissions after 2020.
The Commission did propose a 40% reduction target
in emissions by 2030 for the EU as a whole, but this is a fig leaf. Under
the new rules, everyone is committed in theory, but nobody is responsible
for meeting the targets. The Commission continues to insist that radical
reductions in CO2 emissions can be achieved without damaging the European
economy or competitiveness. But several years of painful experience have
revealed this to be false, which is why the country targets are now being
ditched.
Take Spain, where financial incentives for
renewable energy have driven renewables to as much as 25% of electricity
generation. They have also left the country with a $41 billion gap between
what energy costs to produce and what utilities can charge for power.
Mariano Rajoy's government has been scrambling to scale back the subsidies
and close the gap. These efforts have left in the lurch those who installed
wind and solar on the promise of high fixed payments for their power.
In Germany,
Angela Merkel is also seeking to
push through cuts in wind and solar subsidies and to cap new installations
of renewable capacity going forward. Germany's feed-in tariffs—which
guarantee renewable-energy suppliers above-market prices for their
power—have helped drive up retail power prices by 17% in the past four years
while costing utilities and small businesses billions. Many of Germany's
largest energy users are exempt from the green surcharges, a fact that the
European Commission is currently investigating as a possible illegal
subsidy.
European leaders are also finally figuring out that
America's shale natural gas boom is giving the U.S. a significant energy
cost advantage. Many European companies are moving production to the U.S. so
they can stay competitive, which explains why the Commission also resisted
calls to impose onerous environmental permitting requirements on hydraulic
fracturing. The fracking revolution has sharply reduced American carbon
emissions, by the way, as coal-fired power plants have given way to cheaper
natural gas—an accomplishment that was in nobody's five-year plan.
Europe's anticarbon policy implosion ought to be a
lesson to Americans, though most U.S. media still fail to report it. Perhaps
they have too much invested in climate-change politics. But eventually facts
prevail, even in Washington.
On January 6, 2014 CBS Sixty Minutes did a depressing module on how the
$150 billion of taxpayer dollars lost in stimulus funding of alternative energy
plants. But pennies of that $150 loss may be recovered. The Chinese are buying
up these empty plants at pennies on the dollar for alternative uses like making
automobile parts to ship to China. USA taxpayers monumentally stimulated the
Chinese economy.
But instead of breakthroughs, the sector suffered a
string of expensive tax-funded flops. Suddenly Cleantech was a dirty word.
"The Cleantech Crash: Despite billions invested by the U.S. government
in so-called “Cleantech” energy, Washington and Silicon Valley have little to
show for it," by Leslie Stahl, CBS News, January 5, 2014 ---
http://www.cbsnews.com/news/cleantech-crash-60-minutes/
The following is a script from "The Cleantech
Crash" which aired on Jan. 5, 2014. Lesley Stahl is the correspondent.
Shachar Bar-On, producer.
About a decade ago, the smart people who funded the
Internet turned their attention to the energy sector, rallying tech
engineers to invent ways to get us off fossil fuels, devise powerful solar
panels, clean cars, and futuristic batteries. The idea got a catchy name: “Cleantech.”
Silicon Valley got Washington excited about it.
President Bush was an early supporter, but the federal purse strings truly
loosened under President Obama. Hoping to create innovation and jobs, he
committed north of a $100 billion in loans, grants and tax breaks to
Cleantech. But instead of breakthroughs,
the sector suffered a string of expensive tax-funded flops. Suddenly
Cleantech was a dirty word.
Investor Vinod Khosla, known as the father of the
Cleantech revolution, has poured over a billion dollars of his own money
into some 50 energy startups. He took us to one in Columbus, Miss. KiOR is a
biofuel company that’s replacing oil drilling with oil making.
Vinod Khosla: Nature takes a million years to
produce our crude oil. KiOR can produce it in seconds.
The company took over this old paper mill, where
logs are picked up by a giant claw, dropped into a shredder and pulverized
into woodchips.
Vinod Khosla: And we take that, add this magic
catalyst-
Lesley Stahl: This is the secret sauce?
Vinod Khosla: Yeah.
Lesley Stahl: You throw that on top of the chips?
Vinod Khosla: And then, out comes something that
looks that looks just like crude oil.
The crude is created through a thermo-chemical
reaction in seconds. And by using wood instead of corn, this biofuel doesn’t
raise food prices which was a concern with ethanol.
Vinod Khosla: It smells like crude, it works like
crude except it's 100 percent renewable.
Then it’s distilled onsite into…
Lesley Stahl: Clean gasoline?
Vinod Khosla: Clean green gasoline.
Lesley Stahl: This goes right into the tank, right?
You don’t have to build a new infrastructure?
Vinod Khosla: Absolutely.
Lesley Stahl: You make it sound almost – sorry –
too good to be true. There must be a downside.
Vinod Khosla: There is no downside.
Well there is: first off, his clean green gasoline
costs much more than what you pay at the pump. And despite hundreds of
millions of dollars invested – including 165 million of Khosla’s own money,
KiOR is still in the red, and the manufacturing is so complex, it is riddled
with delays.
Lesley Stahl: All kinds of glitches.
Vinod Khosla: That always happens but part of
anything, whether you're building a refinery or a solar facility or a
computer factory, you get exactly the same unanticipated glitches.
He’s downplaying the glitches. But the venture
capital model is that for every 10 startups, nine go under. And he says he
expects at least half of his energy companies will fail. But Khosla can take
that gamble. He earned billions with two giant Silicon Valley winners: Sun
Microsystems and Juniper Networks. It was successes like these that gave
Khosla and the other Silicon Valley moneymen the moxie to jump into energy.
Steven Koonin: I think they saw it as a technical
opportunity, thinking that the people in energy are just troglodytes and
they don't understand what they're doing.
Former Energy Department under secretary, Physicist
Steven Koonin, says there was a lot of arrogance. He thought the venture
capitalists and Internet geniuses were underestimating the challenges of the
energy sector.
Lesley Stahl: Like what?
Steven Koonin: Managing risks that have to do with
market, with supply, with operation, with regulation. And in the end, hoping
that you get returns on a 20 or 30-year time scale.
Lesley Stahl: Yeah, but they must’ve known they
weren’t going to get a payoff for 20 or 30 years.
Steven Koonin: I don’t think they understood that.
The average venture capitalist likes to get in and out in about 3 to 5
years.
While other venture capitalists have withdrawn from
the energy sector, Khosla is staying in, but with a lot of help from
taxpayers. Over the years, the federal government has committed north of a
hundred million dollars to his various Cleantech ventures and several states
have pitched in hundreds of millions as well. But his critics say he’s in
over his head.
Robert Rapier: Vinod Khosla is very smart, but
would you let him operate on your heart?
Lesley Stahl: No.
Robert Rapier: No, because that’s not his area of
expertise.
Robert Rapier, a chemical engineer specializing in
Biofuels, says Khosla and almost all the other venture capitalists in
Silicon Valley got caught up in their own hype.
Robert Rapier: He set up a system where he
overpromised and under-delivered and so the public and the politicians all
developed unreasonable expectations.
Lesley Stahl: But hasn’t technology advanced enough
so that somebody like Vinod Khosla could think: “Ah, we can do it more
cheaply, faster."
Robert Rapier: Well yeah, but in the field of
advanced biofuels, he has not done very well. The companies that he’s
brought out are in trouble. Their share prices are down 80, 85 percent. "[Vinod
Khosla] set up a system where he overpromised and under-delivered, and so
the public and the politicians all developed unreasonable expectations."
Lesley Stahl: What about this criticism that what
it takes to be successful in Silicon Valley does not translate into the
energy business? It's such a completely different field.
Vinod Khosla: That's fair criticism. But I am
learning. And I am trying. And they're sitting there doing nothing. They're
being the nay-sayers, the pundits who say why it can't be done. But they
won't try. Now, sure we've done lots of things that failed in energy. But
every time, we learned. Picked ourselves up and tried something new.
Robert Rapier: He’s getting up that learning curve,
but taxpayers funded that. A billionaire came into the energy business –
Lesley Stahl: You’re saying we paid him to learn is
what—
Robert Rapier: We paid him to learn the energy
business.
The federal government has allocated a total of
$150 billion to Cleantech – through loans, grants and tax breaks with little
to show for it.
Lesley Stahl: The taxpayers have lost a lotta money
in the general Cleantech area.
Vinod Khosla: Look, we have to take risks. And
risks mean the risk of losing money. So let me ask you a question. We've
been looking for a cure for cancer for a long time. How much money has the
U.S. government spent? Billions and billions of dollars. Should we stop
looking for a cure for cancer because we haven't found a cure?
But under the Obama Stimulus Act, the government
wasn’t just supporting research. With Cleantech it was shoveling money to
build assembly lines, helping startups in the manufacturing phase. Over half
a billion dollars went to a solar-panel company named Solyndra to build a
factory. When solar was undercut by low prices in China, Solyndra died.
Another half billion in loan guarantees went to
Fisker, a clean car startup that promised to open a plant in Delaware, but
went bankrupt. And in other cases production was ramped up before there was
any demand – as with LG Chem in Michigan. "Look, we have to take risks. And
risks mean the risk of losing money. So let me ask you a question. We've
been looking for a cure for cancer for a long time. How much money has the
U.S. government spent? Billions and billions of dollars. Should we stop
looking for a cure for cancer because we haven't found a cure?"
[Obama: Shovels will soon be moving earth and
trucks will be pouring concrete where we are standing.]
The plant was built with $151 million from the
stimulus to make batteries for electric cars that people never bought. So
the plant went idle and workers were paid tax dollars to sit around and do
nothing.
These loans and grants were administered by the
Energy Department. They wouldn’t give us an interview, but Steven Koonin was
actually the head scientist for the department, approving many of the
stimulus projects.
Lesley Stahl: The government spent about $150
billion into these innovations. Taxpayer dollars. Money well spent?
Steven Koonin: I think there are significant
developments that have come out of that spending that impact our energy
system now. New technologies demonstrated. I think it was good value for the
money.
Lesley Stahl: Well, Solyndra went through over half
a billion dollars before it failed. Then I'm gonna give you a list of other
failures: Abound Energy, Beacon Power, Fisker, V.P.G., Range Fuels, Ener1,
A123. ECOtality. I'm exhausted.
Steven Koonin: As I told you in the beginning, the
energy business is tough.
Lesley Stahl: What happened?
Steven Koonin: Oh, gosh, there are so many reasons.
I put some of the major blame on the government, both the executive branch
and Congress, for an inability to set a thoughtful and consistent energy
policy.
Lesley Stahl: Let me interrupt you. You were the
government. How many of the loans were you involved in?
Steven Koonin: Difficult to know the exact number.
But I would say in the order of 30.
Lesley Stahl: Did you make mistakes?
Steven Koonin: I think I didn’t do as good a job as
I could’ve. In retrospect, I would’ve done things a bit differently.
Lesley Stahl: Part of this was supposed to be
creating new jobs. Everything I've read there were not many jobs created.
Steven Koonin: That's correct.
Lesley Stahl: So what went wrong there?
Steven Koonin: I didn't say it would create jobs.
Other people did.
Lesley Stahl: So you never thought it was gonna
create-
Steven Koonin: I didn't think it mattered as a job
creation, no.
Lesley Stahl: So, is Cleantech dead?
Steven Koonin: There are parts of it that I would
say are on life support right now.
The stimulus investment wasn’t a total bust. It
helped create the successful electric car company Tesla. A few of other
companies are starting to show promise, and loans are being repaid.
But Cleantech was dealt a hammer blow by this:
plentiful, inexpensive and relatively clean domestic natural gas. So by
2012, the moneymen of Silicon Valley were dropping energy from their
portfolios and soon struggling and bankrupt Cleantech companies were on the
auction block at firesale prices. And guess who snatched them up? China! The
most aggressive buyer is arguably this man.
Pin Ni and his autoparts company Wanxiang have made
six big investments in American Cleantech so far, including buying A123,
another electric car battery startup that lost over 130 million tax dollars.
Lesley Stahl: A lot of the companies that you have
bought in the Cleantech area got a lot of federal subsidies. I have the
list.
Pin Ni: A123 did, yes.
Lesley Stahl: Well, Ener1 did –
Pin Ni: Ener1 did, yeah.
Lesley Stahl: Smith Electric Trucks.
Pin Ni: I would think so, yeah.
Lesley Stahl: There's something that just doesn't
feel right about a Chinese company coming in and scooping it all up after
the taxpayers put so much money into it.
Pin Ni: My answer will be: Do we like the
capitalism or not? If we do, that is the capitalism.
Lesley Stahl: But do you think it’s a good
business? Do you think Cleantech is going well?
Pin Ni: Cleantech is not going well.
But China is willing to make a long-term bet on the
technology, and spend what it takes to develop the manufacturing. But here’s
where it gets complicated: this is Wanxiang’s American subsidiary with 27
plants in 13 states and some 6,000 American workers. Pin Ni says every third
car made in the U.S. has Wanxiang parts.
Lesley Stahl: You understand the suspicion around
you, this company that you're here just to take our high-tech-
Pin Ni: Sure. Absolutely.
Lesley Stahl: --technology, you know, and get it
back to China as fast as you can.
Pin Ni: But my simple question is: for what? I'm
not the president of China. I'm the president of Wanxiang America, right? So
whatever we do has to benefit us. We are here to conduct business. We are
here to make money.
And so the irony: that taxpayer money for Cleantech
and jobs ended up with a Chinese company creating Cleantech and Jobs… in
America.
Lesley Stahl: American taxpayers have spent
billions on Cleantech. Have we gotten our money's worth?
Pin Ni: If you measure them by today's standard I
would say definitely not. You didn't see anything come out of it. But if you
view this as a step stone to the future, when you get there, when you look
back, I would say yes.
But Vinod Khosla says if the U.S. government
doesn’t put more money into this technology – when we get there, it will all
be in China. He wants to open KiOR biofuel plants like this in every
defunct paper mill in the country.
Continued in article
Jensen Comment
Vinod Khosla wants to covert all the defunct paper mills into losing biomass
fuel plants with the taxpayers footing the bill. Actually that is not quite
true. If the Fed simply prints another trillion dollars Vinod's fiascos can be
funded for with free money. But Vinod's gasoline will still be $20 per gallon.
"Obama's Education Fibs," by Jason L. Riley, The Wall Street
Journal, February 4, 2014 ---
http://online.wsj.com/news/articles/SB10001424052702303442704579363140003847878?mod=djemMER_h
Sadly, people in the U.S. and abroad have become
accustomed to the fact that President Obama stretches the truth with some
regularity, whether the topic is his health-care law, the terror attacks in
Benghazi or "red lines" in Syria. In his interview with Fox News's Bill
O'Reilly on Sunday, the president offered up another whopper.
Asked by Mr. O'Reilly why he opposed school
vouchers that "level the playing field" and "give poor people a chance to go
to better schools," the president replied, "Actually, every study that's
been done on school vouchers, Bill, says that it has very limited impact if
any."
Mr. Obama said that the means-tested voucher
programs in Milwaukee and Washington, D.C, "didn't actually make that much
of a difference," and added, "As a general proposition, vouchers have not
significantly improved the performance of kids that are in these poorest
communities."
In fact, study after study using gold-standard
random-assignment methodology has shown that vouchers not only improve
student outcomes but have the biggest impact on low-income minorities.
Here's a sampling:
A 2013 study by Matthew Chingos of the Brookings
Institution and Paul E. Peterson of Harvard found that school vouchers boost
college enrollment for blacks by 24%. A 2006 evaluation of a school choice
program in Dayton, Ohio, found that "after two years, black voucher students
had combined reading and math scores 6.5 percentile points higher than the
control group." A 2010 study in the Journal of Educational and Behavioral
Statistics found that voucher recipients had math scores 5 points higher
than the control group after just one year. A 2008 study of vouchers in
Charlotte, N.C., found that "after one year, voucher students had reading
scores 8 percentile points higher than the control group and math scores 7
points higher."
What about the voucher programs in Milwaukee and
Washington that Mr. Obama dismissed as ineffective? A 1998 Brookings
Institution study found that "After four years, voucher students had reading
scores 6 Normal Curve Equivalent (NCE) points higher than the control group,
and math scores 11 points higher. NCE points are similar to percentile
points." And the Obama administration itself released a report on the D.C.
voucher program in 2010. "The students offered vouchers graduated from high
school at a rate 12 percentage points higher (82 percent) than students in
the control group (70 percent), an impact that was statistically significant
at the highest level," according to a summary. "Students in three of six
subgroups tested showed significant reading gains because of the voucher
offer after four or more years."
According to the president, these studies don't
exist. Nevertheless, the non-existent reports and summaries I quote above
can be found on the website of the Friedman Foundation for Educational
Choice at http://www.edchoice.org/Research/Gold-Standard-Studies. The
preponderance of evidence shows clear benefits for students who receive
school vouchers—whether the measure is test scores, graduation rates or life
outcomes. The research is not mixed or inconclusive.
Mr. Obama's problem with vouchers is not that they
don't work. Rather, it's that they work all too well and thus present a
threat to the education status quo and the teachers unions who control it.
Democrats like Mr. Obama are deeply dependent on union support--so dependent
that they will sometimes tell bald-faced lies about school-choice research
on national television and hope that no one notices.
My objection to the ACA at the beginning of 2014 is that the health care
insurance plans with or without subsidies are awful. The 20%-30% deductibles are
too high coupled with the co-payments are more than most insured people can
afford. They will simply avoid going to doctors for preventative care, for
diagnoses, and for treatments unless they feel their lives are threatened enough
to possibly wipe out their savings for expensive treatments.
Now the Congressional Budget Office is admitting that its own estimates
before the ACA was passed was way off base in terms of estimations of job losses
and economic impacts.
Even liberals writing for liberal magazines knew the Congressional Budget
Office (CBO) optimism for cost and revenue predictions
were not credible before the ACA was passed. The CBO's political bias is
responsible for much of the mess the USA now finds itself in terms of health
coverage.
Fuzzy CBO Accounting Tricks
"ObamaCare by the Numbers: Part 2," by John Cassidy, The New Yorker,
March 2010 ---
http://www.newyorker.com/online/blogs/johncassidy/2010/03/obamacare-by-the-numbers-part-2.html
This is a long and somewhat involved followup to my
previous post on ObamaCare. . For those of you
with O.A.D.D. (online attention-deficit disorder), I’ve provided an express
and local version.
EXPRESS:
The official projections for health-care reform,
which show it greatly reducing the number of uninsured and also reducing the
budget deficit, are simply not credible. There are three basic issues.
The cost and revenue projections rely on
unrealistic assumptions and accounting tricks. If you make some adjustments
for these, the cost of the plan is much higher.
The so-called “individual mandate” isn’t really a
mandate at all. Under the new system, many young and healthy people will
still have a strong incentive to go uninsured.
Once the reforms are up and running, some employers
will have a big incentive to end their group coverage plans and dump their
employees onto the taxpayer-subsidized individual plans, greatly adding to
their cost.
Continued in article
For starters, $1 trillion of extra debt-financed
spending would cause the government to pay about $300 billion of extra interest
in the next decade. Moreover, the CBO's method of estimating the cost of such a
program doesn't recognize the incentives it creates for households and firms to
change their behavior. The House health-care bill gives a large subsidy to
millions of families with incomes up to three times the poverty level (i.e., up
to $66,000 now for a family of four) if they buy their insurance through one of
the newly created "insurance exchanges," but not if they get their insurance
from their employer. The CBO's cost estimate
understates the number who would receive the subsidy because it ignores the
incentive for many firms to drop employer-provided coverage.
It also ignores the strong incentive that individuals would have to reduce
reportable cash incomes to qualify for higher subsidy rates. The total cost of
ObamaCare over the next decade likely would be closer to $2 trillion than to $1
trillion.
Martin Feldstein, "ObamaCare's
Crippling Deficits The higher taxes, debt payments and interest rates needed to
pay for health reform mean lower living standard," The Wall Street Journal,
September 7, 2009 ---
http://online.wsj.com/article/SB10001424052970203585004574393110640864526.html?mod=djemEditorialPage
The Budget and Economic Outlook: 2014 to 2024 ---
Congressional Budget Office (CBO)
February 4, 2014
Jensen Comment
Especially note Page 127 regarding the Affordable Care Act impact on employment
in the USA.
The Affordable Care Act will also reduce the number
of fulltime workers by more than 2 million in coming years, congressional
budget analysts said in the most detailed analysis of the law’s impact on
jobs. The CBO said the law’s impact on jobs would be mostly felt starting
after 2016. The agency previously estimated that the economy would have
800,000 fewer jobs as a result of the law. The impact is likely to be most
felt, the CBO said, among low-wage workers. The agency said that most of the
effect would come from Americans deciding not to seek work as a result of
the ACA’s impact on the economy. Some workers may forgo employment, while
others may reduce hours, for a equivalent of at least 2 million fulltime
workers dropping out of the labor force.
Jensen Comment
Although before the ACA was passed President Obama and and House Majority Leader
Nancy Pelosi erroneously promised that the ACA would create millions of new
jobs. Now that this does not appear to be the case in 2014. President Obama and
his allies MSNBC and the New York Times try to put a positive spin
on this by saying this will allow many people to drop out of the work force by
retiring early (before becoming eligible for Medicare). But what they fail to
mention is that the loss of 800,000 jobs because of the ACA is hardly a good
thing for people needing work. Many of these jobs will be lost when smaller
businesses with 50-100 employees scale back the workforce to 50 or less so as
not to have to pay the stiff penalty for not providing health insurance to
employees. How can you put a favorable spin on this.
Of course most of this document is devoted to good news and bad news items
apart from the ACA.
The federal budget deficit has fallen sharply
during the past few years, and it is on a path to decline further this year
and next year. CBO estimates that under current law, the deficit will total
$514 billion in fiscal year 2014, compared with $1.4 trillion in 2009. At
that level, this year’s deficit would equal 3.0 percent of the nation’s
economic output, or gross domestic product (GDP)—close to the average
percentage of GDP seen during the past 40 years.
As it does regularly, CBO has prepared baseline
projections of what federal spending, revenues, and deficits would look like
over the next 10 years if current laws governing federal taxes and spending
generally remained unchanged. Under that assumption, the deficit is
projected to decrease again in 2015—to $478 billion, or 2.6 percent of GDP.
After that, however, deficits are projected to start rising—both in dollar
terms and relative to the size of the economy—because revenues are expected
to grow at roughly the same pace as GDP whereas spending is expected to grow
more rapidly than GDP. In CBO’s baseline, spending is boosted by the aging
of the population, the expansion of federal subsidies for health insurance,
rising health care costs per beneficiary, and mounting interest costs on
federal debt. By contrast, all federal spending apart from outlays for
Social Security, major health care programs, and net interest payments is
projected to drop to its lowest percentage of GDP since 1940 (the earliest
year for which comparable data have been reported).
The large budget deficits recorded in recent years
have substantially increased federal debt, and the amount of debt relative
to the size of the economy is now very high by historical standards. CBO
estimates that federal debt held by the public will equal 74 percent of GDP
at the end of this year and 79 percent in 2024 (the end of the current
10-year projection period). Such large and growing federal debt could have
serious negative consequences, including restraining economic growth in the
long term, giving policymakers less flexibility to respond to unexpected
challenges, and eventually increasing the risk of a fiscal crisis (in which
investors would demand high interest rates to buy the government’s debt).
After a frustratingly slow recovery from the severe
recession of 2007 to 2009, the economy will grow at a solid pace in 2014 and
for the next few years, CBO projects. Real GDP (output adjusted to remove
the effects of inflation) is expected to increase by roughly 3 percent
between the fourth quarter of 2013 and the fourth quarter of 2014—the
largest rise in nearly a decade. Similar annual growth rates are projected
through 2017. Nevertheless, CBO estimates that the economy will continue to
have considerable unused labor and capital resources (or “slack”) for the
next few years. Although the unemployment rate is expected to decline, CBO
projects that it will remain above 6.0 percent until late 2016. Moreover,
the rate of participation in the labor force—which has been pushed down by
the unusually large number of people who have decided not to look for work
because of a lack of job opportunities—is projected to move only slowly back
toward what it would be without the cyclical weakness in the economy.
Beyond 2017, CBO expects that economic growth will
diminish to a pace that is well below the average seen over the past several
decades. That projected slowdown mainly reflects long-term
trends—particularly, slower growth in the labor force because of the aging
of the population. Inflation, as measured by the change in the price index
for personal consumption expenditures (PCE), will remain at or below 2.0
percent throughout the next decade, CBO anticipates. Interest rates on
Treasury securities, which have been exceptionally low since the recession,
are projected to increase in the next few years as the economy strengthens
and to end up at levels that are close to their historical averages
(adjusted for inflation).
Deficits Are Projected to Decline Through 2015 but
Rise Thereafter, Further Boosting Federal Debt
Assuming no legislative action that would
significantly affect revenues or spending, CBO projects that the federal
budget deficit will fall from 4.1 percent of GDP last year to 2.6 percent in
2015—and then rise again, equaling about 4 percent of GDP between 2022 and
2024. That pattern of lower deficits initially and higher deficits for the
rest of the coming decade would cause federal debt to follow a similar path.
Relative to the nation’s output, debt held by the public is projected to
decline slightly between 2014 and 2017, to 72 percent of GDP, but then to
rise in later years, reaching 79 percent of GDP at the end of 2024. By
comparison, as recently as the end of 2007, such debt equaled 35 percent of
GDP (see the figure below).
Continued in article
Note that declines in deficits are still increases in debt as long as they
remain spending "deficits.". This is not as bad for a government controlling the
money printing presses as it is for entities (citizens, towns, counties, state,
and businesses) that cannot print money to avoid bankruptcy.
Bob Jensen's threads on the sad state of governmental accounting and the $100
trillion of debt that is off balance sheet ---
http://www.trinity.edu/rjensen/Entitlements.htm
Meanwhile pray for heavy rains and snow in the Southwest, especially Nevada
and Colorado. Years of drought could destroy any lingering optimism in this CBO
budget forecast.
Please don't shoot the messenger!
"Calculating the health care individual mandate penalty," by Debra M.
Johnson, Journal of Accountancy, January 2014
http://www.journalofaccountancy.com/Issues/2014/Jan/20138935.htm
"Minimum essential coverage and shared-responsibility penalty rules
provide transitional relief for individuals," by Sally P. Schreiber, Journal of Accountancy,
January 24, 2014 ---
http://www.journalofaccountancy.com/News/20149497.htm
CPA's who advise clients about personal finances and health care insurance
should be aware of the following:
The ACA made it possible for some wealthy people to sign up for Medicaid's
free medical services, nursing homes, and free medication
"Will You Owe Debt After Death? The Medicaid Surprise," by Morgan
Brittany, Townhall, January 27, 2014 ---
http://finance.townhall.com/columnists/morganbrittany/2014/01/27/will-you-owe-debt-after-death--the-medicaid-surprise-n1785111
This was not in the fine print of the Affordable
Care Act (that no one read), and there was nothing in it that changed the
existing law from 1993. The ACA however, did expand the number of
people who are eligible for Medicaid, so now there are more people from the
ages of 55 to 65 whose estates could be on the hook for Medicaid expenses
after the beneficiary dies.
This sounds like a cash grab to me. Many states
have not changed the law to limit the amount of expenses the government can
claim are owed for Medicaid, but Oregon and Washington have issued emergency
rule changes. In
Washington it now says that the state can only
recover the cost of nursing home care for the 55-65 age groups.Oregon
followed this path as well.However there are 23 other states that have
expanded Medicare under Obamacare and they have not changed their estate
recovery policies. This could end up with the deceased person’s heirs losing
homes, property and other assets.
The 1993 law stated that spouses and children under
21 of the deceased person were exempt from estate recovery, but the rules
can vary by state. However, with rule changes running rampant under this
administration, there is no guarantee of anything anymore. Laws and rules
can be changed on a whim and the public will never even be aware of it.
Just to give you an example of the amount of money
that the states could potentially confiscate, in 2004, California collected
$44.6 million through estate recovery and MediCal
officials say that they expect 1 to 2 million more enrollees by 2015. That
could add up to a lot of money. Minnesota collected $25 million in 2004 and
is keeping its recovery program in place with no alterations.
Dr. Jane Orient of The Association of American
Physicians and Surgeons says; “I think that people are maybe in for a
shock when they find out that their heirs are going to be paying for their
care, because they got into a system under false pretenses”. Just one
more thing that no one told us about Obamacare and the mainstream media is
not mentioning even now.
Continued in article
The ACA made it possible in some states for even millionaires to get
Medicaid's free medical care, nursing care, and medications.
"Will You Owe Debt After Death? The Medicaid Surprise," by Morgan Brittany,
Townhall, January 27, 2014 ---
http://finance.townhall.com/columnists/morganbrittany/2014/01/27/will-you-owe-debt-after-death--the-medicaid-surprise-n1785111
This was not in the fine print of the Affordable
Care Act (that no one read), and there was nothing in it that changed the
existing law from 1993. The ACA however, did expand the number of
people who are eligible for Medicaid, so now there are more people from the
ages of 55 to 65 whose estates could be on the hook for Medicaid expenses
after the beneficiary dies.
This sounds like a cash grab to me. Many states
have not changed the law to limit the amount of expenses the government can
claim are owed for Medicaid, but Oregon and Washington have issued emergency
rule changes.In
Washington it now says that the state can only
recover the cost of nursing home care for the 55-65 age groups.Oregon
followed this path as well.However there are 23 other states that have
expanded Medicare under Obamacare and they have not changed their estate
recovery policies. This could end up with the deceased person’s heirs losing
homes, property and other assets.
The 1993 law stated that spouses and children under
21 of the deceased person were exempt from estate recovery, but the rules
can vary by state. However, with rule changes running rampant under this
administration, there is no guarantee of anything anymore. Laws and rules
can be changed on a whim and the public will never even be aware of it.
Just to give you an example of the amount of money
that the states could potentially confiscate, in 2004, California collected
$44.6 million through estate recovery and MediCal
officials say that they expect 1 to 2 million more enrollees by 2015. That
could add up to a lot of money. Minnesota collected $25 million in 2004 and
is keeping its recovery program in place with no alterations.
Dr. Jane Orient of The Association of American
Physicians and Surgeons says; “I think that people are maybe in for a
shock when they find out that their heirs are going to be paying for their
care, because they got into a system under false pretenses”. Just one
more thing that no one told us about Obamacare and the mainstream media is
not mentioning even now.
Continued in article
"Covered California clients have trouble finding doctors," by Victoria
Colliver, San Francisco Chronicle, January 23, 2014 ---
http://www.sfgate.com/health/article/Covered-California-clients-have-trouble-finding-5169944.php
Think signing up for health insurance through
Covered California is hard? Some consumers say the real battle starts when
it comes to finding a doctor or hospital that will take a plan purchased
through the state-run health exchange.
Sue Kearney of Oakland thought she did her
homework. She found the policy she thought was right for her - one from
Anthem Blue Cross - and checked the plan's
directory of doctors and hospitals to make sure she could get the specialist
she wanted. Assured of that, she signed up for the plan in October.
But right before a doctor appointment this month,
Kearney learned the physician's medical group will not accept any of Covered
California plans.
Kearney, 63, who has a chronic digestive problem
that hasn't responded to treatment, ended up paying $200 for the
appointment, despite her newly minted coverage. "It's confusing and
demoralizing," she said.
Most of the problems with the new health system
have focused on online application glitches, long wait times to get help and
delays in getting insurance cards and first-month premium bills to
new enrollees.
'A lot of confusion'
But now that coverage has started, some people are
finding it tough to determine whether their doctor or hospital will accept
their coverage. Consumers say the insurer's directory of doctors and
hospitals is inaccurate or out of date. In some cases, the doctors don't
even know what to tell their patients.
"There's a lot of confusion. The physicians don't
know if they're actually participating" in the exchange's networks, said
Donald Waters, executive director of the
Alameda-Contra Costa Medical Association, which
represents 3,100 doctors in the East Bay.
The problem is not limited to California. A study
released last month by the consulting group McKinsey found that many plans
sold through the federal health law are using "narrow" or "ultra narrow"
networks - physician and hospital lists that are limited to lower costs.
In more than two-thirds of all exchange networks
analyzed by McKinsey, at least 30 percent of the largest 20 local hospitals
were excluded. Insurers say the move to limit the number of doctors and
hospitals on a network was necessary to keep the costs of premiums low.
In California, plans offered by
Blue Shield through Covered California included
just 60 percent of the doctors that participate in the insurer's group plans
and just 75 percent of the hospitals. On top of that, Blue Shield is
reimbursing doctors and hospitals in Covered California policies up to 30
percent less than those not in the exchange, spokesman
Stephen Shivinsky said.
Limited networks
Sy Neilson, spokesman for Sutter Health, one of
Northern California's largest health chains, said not all of its hospitals
or doctors are participating in Covered California plans. But the hospitals
and doctors that are participating are involved in limited networks,
he said.
Anthem officials did not respond to requests
for comment.
For his part,
Peter Lee, Covered California's executive
director, acknowledged that consumers may be getting misinformation from the
state agency or insurer about whether their providers are participating.
But, he said, the exchange is prepared to help those consumers get new plans
that more suitably meet their needs.
"If our directory or the directory of the health
plan is wrong and a consumer wants to change plans, we'll work with them to
make sure they can do so," Lee said in a news call this week.
As for Kearney, she spent much of the past week
trying to find a gastroenterologist and a lab to complete the tests ordered
by the specialist she paid for. She said
Alameda Health System's
Highland Hospital -
the county hospital - was the only center in her area that would take her,
and not until March.
Kearney had even opted for more comprehensive
coverage including a PPO, or preferred provider organization plan. "I chose
a PPO so I could have had choice," she said. "The thing is, now I have
nothing to choose from."
For
Alison Berndt of Livermore, making sure her
physicians were in her new plan's network is especially
important because she was diagnosed with breast cancer in July.
Berndt, 61, selected a more expensive Covered
California plan to ensure her five doctors, particularly her plastic
surgeon, were in the network because she has yet to go through the
reconstructive surgery.
Cutting medications
After she signed up, she called one of the doctors
she thought was included on her Anthem policy and received conflicting
information from the office staff about whether that was true. She spent a
lot of time on the phone and eventually learned she was given misinformation
and they were, indeed, accepting her coverage.
Berndt still hasn't been able to sort out a problem
getting her drugs covered and has been forced to cut her blood pressure and
cholesterol medication in half.
"Every step of the way has been crazy," she said.
From the CFO Journal's Morning Ledger on January 13, 2014
Accenture to take over fixing health-care site
Fixing the HealthCare.gov site will fall to Accenture, which was
tapped to replace an embattled contractor that was largely responsible for
creating the health portal,
the WSJ reports.
Accenture Federal Services, a subsidiary based in Arlington, Va., won a
one-year contract to continue technical improvements to the site after the
government chose not to renew its contract with CGI Group. Accenture faces a
tough task as the new lead contractor: repairing the online insurance
marketplace quickly enough to enroll millions more consumers under the
Affordable Care Act.
Jensen Comment
Accenture may fix the healthcare.com Website. But Accenture cannot fix the
problem that health insurance premiums are too expensive for the middle class
except for the millions that are subsidized heavily by taxpayers. The ACA was
built on a foundation of deception and is not sustainable until major revisions
are accomplished in a Congress that may never agree to revisions needed to stop
the subsidy and Medicaid hemorrhaging.
Students in the USA should be flocking to Medicaid!
In terms of numbers of abusers I don't anticipate great abuse of Medicaid by
most millionaires except by wealthy students who can lock assets away into
trust funds that have only unrealized capital gains while they are still in
school. This allows them to join millions and millions of poorer students
who are flocking to Medicaid.
The argument goes that students can elect to stay on their parent's
medical insurance. Yeah Right!
The the parents are likely on plans with relatively large co-payments every time
a family member goes to the doctor or to a hospital. And medications are not
likely to be such a good deal as getting those medicines free on Medicaid. I
see no rationale other than ignorance for a student to stay on the medical plan
of a parent until age 26 when that student can opt for Medicaid's free medical
services and totally free medicines.
Then we have the middle class workers newly added to Medicaid who have
modest wealth that prevented them from getting Medicaid until 2014.
They can now have millionaire assets and no longer have to give up their joint ownership
with spouses on homes and savings funds accumulating unrealized capital gains
rather than interest and dividends.
"Millionaires on Medicaid Got a house worth $802,000, lots of savings and a
nice car? You might still qualify for benefits," by Mark Warshawsky,, The
Wall Street Journal, January 6, 2014 ---
http://online.wsj.com/news/articles/SB10001424052702304325004579297052950416982?mod=djemBestOfTheWeb_h
Then there's the long-term care discussed by Mark Warshawsky above
Medicare patients have coverage for hospitals, but when they are booted out of
hospitals to nursing homes the nursing home bills are not covered by Medicare.
Supplemental long-term care insurance is very expensive and generally pays only
a pittance of the nursing home monthly billings. Retired folks making more than
$50,000 per year are not likely to abandon Medicare. But those who own their own
own homes and have less annual income might consider abandoning Medicare.
For example, Mr. and Mrs Smith own their own home and live on $22,000 a year
after Medicare fees are deducted from their Social Security benefits. They could
probably save money and get much better medical care by abandoning Medicare and
opting for free Medicaid. They can still own their home and possibly even get a
reverse mortgage for more tax free cash flow. They could save the Medicare
premiums (that are substantial), have zero Medicare co-pays for medical care and
medicines --- medicines are not totally free under Medicare-D like they are
under Medicaid. Medicare has a 20% co-pay.
And when Mr. Smith has a stroke and must vegetate in a nursing home,
Medicaid, unlike Medicare, will pay his nursing home fees for as long as he
lives.
Add to this the fraudulent wealth transfers that can take place with adult
children to hide savings income that would made oldsters ineligible for
Medicaid, and you have another government program that can be abused for
billions and billions of dollars.
CPAs who advise regarding personal finances should learn all the legal
strategies that did not exist before 2014
The 10 Best Places In The World To Retire ---
Read more:
http://www.nextavenue.org/blog/best-places-world-retire-2014-edition#ixzz2poA6idXM
Jensen Comment
These are the worst places to retire. The best places to retire are the states
in the USA that will soon be providing free lifetime nursing home care to most
folks who now find it to their advantage of to drop Medicare (that pays zero for
nursing home care) in favor of Medicaid (that pays all nursing home care)
---
"Millionaires on Medicaid Got a house worth $802,000, lots of savings and
a nice car? You might still qualify for benefits," by Mark Warshawsky,, The
Wall Street Journal, January 6, 2014 ---
http://online.wsj.com/news/articles/SB10001424052702304325004579297052950416982?mod=djemBestOfTheWeb_h
How CPAs Can Prepare Clients for Healthcare Reform, especially small
businesses ---
http://blog.aicpa.org/2014/01/how-cpas-can-prepare-clients-for-healthcare-reform.html#sthash.qkRD8Gz7.Mi01QnHA.dpuf
CPAs who advise retired folks on their personal finances need
to update their knowledge of the new strategies available.
"Millionaires on Medicaid Got a house worth $802,000, lots of savings and
a nice car? You might still qualify for benefits," by Mark Warshawsky,, The
Wall Street Journal, January 6, 2014 ---
http://online.wsj.com/news/articles/SB10001424052702304325004579297052950416982?mod=djemBestOfTheWeb_h
Expanding Medicaid coverage to an estimated nine
million more Americans—as mandated by the Affordable Care Act—reinforces the
idea that Medicaid only serves the poor. That perception is not accurate.
And it distracts from a looming budgetary threat to the program: long-term
care.
More than two-thirds of annual spending on
long-term care for the elderly is paid by state and federal governments, $60
billion of which flows from Medicaid. With 10,000 baby boomers reaching
retirement age every day for the next 19 years, the Congressional Budget
Office projects that spending on long-term care will more than double by
2050—to 3% of GDP from 1.3%.
We might accept these rising costs if benefits
flowed only to the elderly poor, as originally intended. But that is not the
case. Significant long-term care benefits flow to individuals in the top 20%
of retirement earnings, enabled by Medicaid's generous asset-exclusion
limits.
In many states, an elderly person may own a home
valued at $802,000, plus home furnishings, jewelry and an automobile of
uncapped value while receiving long-term Medicaid support. In addition, they
are allowed to have various life-insurance policies, retirement accounts
with unlimited assets, $115,920 in assets for a spouse, income from Social
Security, and a defined-benefit pension plan. By most standards, such a
household would be considered wealthy.
Despite these generous rules, some individuals even
game the system further by arranging complex asset transfers or insurance
transactions that sidestep congressional efforts to curb fraud.
The rules wouldn't matter if wealthy individuals
shunned Medicaid long-term care benefits. But with Medicaid crowding out
private alternatives, many don't. In fact, 15% of elderly individuals in the
middle-income quintile, 8% in the upper-middle quintile, and 5% in the top
quintile receive Medicaid benefits.
Even these numbers don't capture the burden wealthy
individuals place on Medicaid because they live much longer than the poor.
Beneficiaries in the top income quintile receive, on average, double the
lifetime payouts of those that are less well-off. And because Medicaid
lowers reimbursement rates to providers and restricts benefits to contain
costs, the poor are tied to lower-quality care and enjoy far less provider
flexibility.
Funds for Medicaid are disbursed to the states by
the federal government through complicated formulas. States in turn
administer Medicaid and long-term care to state residents. While the rules
for each state vary, state governments are mandated by law to pursue the
estates of wealthy residents to recoup the costs incurred by their use of
long-term care programs. Yet the most recent study by Health and Human
Services found that most states recoup less than 2% of total long-term care
spending. Four states—Alaska, Georgia, Michigan and Texas—even reported no
reimbursements whatsoever.
Tightening eligibility rules is the first step
toward a solution. Before receiving Medicaid payouts, for example, wealthier
households should first be asked to draw down the value of their home
through a reverse mortgage to help pay for long-term care. Wealthier
households could also be asked to meet long-term care expenses through life
annuity payouts from their retirement accounts. Such changes would help
ensure that Medicaid benefits flow to the financially needy.
Clearly, alternatives to Medicaid long-term care
are needed for those with means, while the safety net for the elderly poor
remains intact. Four key policy changes would help transform the system into
a more equitable and sustainable one that better serves America's seniors:
First, provide a tax preference for long-term care
insurance policies through retirement and health accounts. Allowing tax-free
withdrawals from existing 401(k), IRA, or Section 125 accounts to pay for
private long-term care insurance would have minimal budget implications.
Lower tax revenues would be offset by cost savings provided by wealthier
seniors drawing on private resources—rather than public funds—to pay for
care.
Second, promote innovative products, such as
"life-care" annuities, which marry life annuities to long-term care
insurance, allowing individuals to finance their care as well as their
retirement. Combining long-term care insurance and life annuities would
decrease their combined costs and considerably ease underwriting standards,
enabling more seniors to afford long-term care coverage.
Third, foster long-term care partnership programs
already operating in most states. These public-private partnerships allow
residents to purchase long-term care insurance and still qualify for
Medicaid if their insurance is exhausted—without depleting all of their
assets. That combines the benefits of private insurance with the backing and
safety net of the government.
Fourth, allow a Medicaid "buyout." Upon retirement,
individuals should have the choice of receiving a lump-sum payment from the
government for a significant portion of the expected value of their Medicaid
benefits. Retirees would be obliged to use the payment to purchase private,
permanent long-term care insurance in place of Medicaid coverage. This would
further reduce Medicaid's future liabilities.
Continued in article
Jensen Comment
Students in the USA should be flocking to Medicaid!
In terms of numbers of abusers I don't anticipate great abuse of Medicaid by
most millionaires except by wealthy students who can lock assets away into
trust funds that have only unrealized capital gains while they are still in
school. This allows them to join millions and millions of poorer students
who are flocking to Medicaid.
The argument goes that students can elect to stay on their parent's
medical insurance. Yeah Right!
The the parents are likely on plans with relatively large co-payments every time
a family member goes to the doctor or to a hospital. And medications are not
likely to be such a good deal as getting those medicines free on Medicaid. I
see no rationale other than ignorance for a student to stay on the medical plan
of a parent until age 26 when that student can opt for Medicaid's free medical
services and totally free medicines.
Then we have the middle class workers newly added to Medicaid who have
modest wealth that prevented them from getting Medicaid until 2014.
They can now have millionaire assets and no longer have to give up their joint ownership
with spouses on homes and savings funds accumulating unrealized capital gains
rather than interest and dividends.
"Millionaires on Medicaid Got a house worth $802,000, lots of savings and a
nice car? You might still qualify for benefits," by Mark Warshawsky,, The
Wall Street Journal, January 6, 2014 ---
http://online.wsj.com/news/articles/SB10001424052702304325004579297052950416982?mod=djemBestOfTheWeb_h
Then there's the long-term care discussed by Mark Warshawsky above
Medicare patients have coverage for hospitals, but when they are booted out of
hospitals to nursing homes the nursing home bills are not covered by Medicare.
Supplemental long-term care insurance is very expensive and generally pays only
a pittance of the nursing home monthly billings. Retired folks making more than
$50,000 per year are not likely to abandon Medicare. But those who own their own
own homes and have less annual income might consider abandoning Medicare.
For example, Mr. and Mrs Smith own their own home and live on $22,000 a year
after Medicare fees are deducted from their Social Security benefits. They could
probably save money and get much better medical care by abandoning Medicare and
opting for free Medicaid. They can still own their home and possibly even get a
reverse mortgage for more tax free cash flow. They could save the Medicare
premiums (that are substantial), have zero Medicare co-pays for medical care and
medicines --- medicines are not totally free under Medicare-D like they are
under Medicaid. Medicare has a 20% co-pay.
And when Mr. Smith has a stroke and must vegetate in a nursing home,
Medicaid, unlike Medicare, will pay his nursing home fees for as long as he
lives.
Add to this the fraudulent wealth transfers that can take place with adult
children to hide savings income that would made oldsters ineligible for
Medicaid, and you have another government program that can be abused for
billions and billions of dollars.
CPAs who advise regarding personal finances should learn all the legal
strategies that did not exist before 2014.
"With health law, less-easy access in N.H.: Lone insurer in plan
reduces roster of hospitals to keep premiums low," by Tracy Jan, Boston
Globe, January 20, 2014 ---
http://www.bostonglobe.com/news/nation/2014/01/20/narrow-hospital-networks-new-hampshire-spark-outrage-political-attacks/j2ufuNSf9J2sdEQBpgIVqL/story.html
When Nancy Petro needs routine tests to make sure
her thyroid cancer and high blood pressure have not returned, the retired
gas station attendant and general store clerk must now drive an hour over
mountainous roads to seek care, even though there is a hospital just minutes
from her home in rural northern New Hampshire.
Petro, 62, had been uninsured until January, when
she obtained coverage through President Obama's groundbreaking health law.
The benefit, just $26 a month, came with a downside, however.
To keep premiums affordable, Anthem Blue Cross and
Blue Shield of New Hampshire, the only insurer in the state offering
coverage in the new insurance marketplace, radically reduced the hospitals
in its network. Petro's local provider did not make the cut. . . .
Of the state's 26 hospitals, 10 are excluded from
Anthem's network. Not on the list: Petro's former provider, Upper
Connecticut Valley Hospital, where the uninsured receive free or discounted
care. The 16-bed facility, located 15 miles from the Canadian border, serves
New Hampshire's largest geographic area and its neediest patient population.
It would be great if the ACA could restrain what have to be called scams by
"legitimate" doctors and hospitals. This is depressing.
"Patients’ Costs Skyrocket; Specialists’ Incomes Soar, by Elisabeth
Rosenthalian, The New York Times, January 18, 2014 ---
http://www.nytimes.com/2014/01/19/health/patients-costs-skyrocket-specialists-incomes-soar.html?exprod=myyahoo&_r=0
. . .
By 2012, dermatologists — whose incomes were more
or less on par with internists in 1985 — had become the fourth-highest
earners in American medicine in some surveys, bringing in an average of
$471,555, according to the Medical Group Management Association, which
tracks doctors’ income, though their workload is one of the lightest.
In addition, salary figures often understate
physician earning power since they often do not include revenue from
business activities: fees for blood or pathology tests at a lab that the
doctor owns or “facility” charges at an ambulatory surgery center where the
physician is an investor, for example.
“The high earning in many fields relates mostly to
how well they’ve managed to monetize treatment — if you freeze off 18
lesions and bill separately for surgery for each, it can be very lucrative,”
said Dr. Steven Schroeder, a professor at the University of California and
the chairman of the National Commission on Physician Payment Reform, an
initiative funded in part by the Robert Wood Johnson Foundation.
Doctors’ charges — and the incentives they reflect
— are a major factor in the nation’s $2.7 trillion medical bill. Payments to
doctors in the United States, who make far more than their counterparts in
other developed countries, account for 20 percent of American health care
expenses, second only to hospital costs.
Specialists earn an average of two and often four
times as much as primary care physicians in the United States, a
differential that far surpasses that in all other developed countries,
according to Miriam Laugesen, a professor at Columbia University’s Mailman
School of Public Health. That earnings gap has deleterious effects: Only an
estimated 25 percent of new physicians end up in primary care, at the very
time that health policy experts say front-line doctors are badly needed,
according to Dr. Christine Sinsky, an Iowa internist who studies physician
satisfaction. In fact, many pediatricians and general doctors in private
practice say they are struggling to survive.
Studies show that more specialists mean more tests
and more expensive care. “It may be better to wait and see, but waiting
doesn’t make you money,” said Jean Mitchell, a professor of health economics
at Georgetown University. “It’s ‘Let me do a little snip of tissue’ and then
they get professional, lab and facility fees. Each patient is like an ATM
machine.”
For example, the procedure performed on Ms. Little,
called Mohs surgery, involves slicing off a skin cancer in layers under
local anesthesia, with microscopic pathology performed between each “stage”
until the growth has been removed. While it offers clear advantages in
certain cases, it is more expensive than simply cutting or freezing off a
lesion. (Hospitals seeking to hire a staff dermatologist for Mohs surgery
had to offer an average of $586,083 in 2010, even more than for a cardiac
surgeon, according to Becker’s Hospital Review.)
Use of the surgery has skyrocketed in the United
States — over 400 percent in a little over a decade — to the point that last
summer Medicare put it at the top of its “potentially misvalued” list of
overused or overpriced procedures. Even the American Academy of Dermatology
agrees that the surgery is sometimes used inappropriately. Dr. Brett
Coldiron, president-elect of the academy, defended skin doctors as “very
cost-efficient” specialists who deal in thousands of diagnoses and called
Mohs “a wonderful tool.” He said that his specialty was being unfairly
targeted by insurers because of general frustration with medical prices.
“Health care reform is a subsidized buffet and if it’s too expensive, you go
to the kitchen and shoot one of the cooks,” he said. “Now they’re shooting
dermatologists.” Pricing 100 Mohs Procedures
A random sample of 100 similar outpatient Mohs
surgeries shows an enormous range in how much was paid for the procedure.
The difference between the most expensive and the least expensive is more
than $7,000.
Continued in article (especially note the graph)
Bob Jensen's Fraud Updates ---
http://www.trinity.edu/rjensen/FraudUpdates.htm
"District court says premium tax credits are available in federal health
care exchanges," by Sally P. Schreiber, Journal of Accountancy,
January 16, 2014 ---
http://www.journalofaccountancy.com/News/20149450.htm
In a decision that aids the
implementation of a key provision of 2010’s health care reform legislation,
the federal district court for the District of Columbia held that the Sec.
36B premium tax credit is available to taxpayers who purchase health
insurance through the 34 state health care exchanges that are run by the
federal government (Halbig
v. Sebelius, No. 13-0623 (PLF) (D.D.C.
1/16/14)).
In May 2012, the IRS issued final
regulations interpreting the Patient Protection and Affordable Care Act, P.L.
111-148, as allowing the IRS to grant tax credits to eligible individuals
who purchase health insurance on either a state-run or a federally run
health care exchange (Regs. Sec. 1.36B-1(k)). The plaintiffs in the case
sued to have this regulation struck down, arguing that the IRS’s
interpretation was contrary to the plain language of Sec. 36B(b)(2)(A),
which provides a credit to eligible individuals who purchase health
insurance through “an Exchange established by the State.” They asserted that
the regulation therefore exceeded the IRS’s statutory authority and violated
the Administrative Procedure Act.
The court applied an analysis from
Chevron U.S.A. v. Natural Resources Defense Council, Inc., 467 U.S. 837
(1984), by asking first whether the statute was ambiguous. After looking at
the text of the statute, the statutory structure, and the legislative
purpose, the court concluded that Sec. 36B(b)(2)(A) is not ambiguous and
that Congress clearly intended to make premium tax credits available on all
exchanges, whether or not established by a state. As a result, the court
held that Regs. Sec. 1.36B-1(k) is a valid interpretation of the law.
Continued in article
Jensen Comment
Note that these are tax credits that dollar-for-dollar reduce the amount of tax
owed before the credit is applied. I assume that this can add to tax credits to
where the credits exceed the tax owed, thereby becoming a negative income tax
where a taxpayer receives a refund in excess of the tax owed before the credit.
I don't think such credits are available for qualified health insurance
purchased outside the exchanges, but I could be wrong on this. For example,
President Obama declared it possible for some people to stay on their own
individual plans. I think they may not be eligible for the tax credits. But I
could be wrong on this.
The liberal Slate magazine's positive review of the GOP modification
plan for the Affordable Health Care Act
"The End of the Beginning on Obamacare Repeal," by Matthew Yglesias,
Slate, January 27, 2014 ---
http://www.slate.com/blogs/moneybox/2014/01/27/gop_health_replacement_plan_the_beginning_of_a_surrender.html
Sens. Tom Coburn, Richard Burr, and Orrin
Hatch
rolled out an Obamacare replacement plan today
that I think offers us a good window into how the health care debate is
evolving on Capitol Hill. I recommend
Philip Klein's rundown in the Washington Examiner for a clear
description of the details,
but the view from 50,000 feet is basically that this is the Republican
Party stepping away from the idea that it's going to repeal the
Affordable Care Act.
Of course, in its
official operations the way the bill works is to first repeal Obamacare
and then replace it with a new law that happens to retain some of
Obamacare's most popular features. For example, "insurers would be
barred from imposing lifetime limits on medical claims and required to
allow individuals to remain on their parents’ policies until the age of
26." And rather than eliminate the Affordable Care Act's restrictions on
insurers charging older people higher premiums than younger people, the
senators would simply make the restrictions a bit less strict. And while
Coburn/Burr/Hatch don't want to altogether ban insurers from refusing to
cover people with pre-existing conditions, they "would require insurers
to offer coverage to anybody who has applied as long as they have
maintained continuous coverage, regardless of whether they are switching
health plans or shifting from employer-based health care to the
individual market."
In other words,
rather than scrapping the main pillars of the Affordable Care Act
entirely, they would partially roll them back.
Conversely, while conservative wonks have
traditionally favored a big bang approach to
eliminating the massive tax subsidies that
keep employer-provided insurance together,
"in consideration of the backlash against
the way that Obamacare has disrupted people’s insurance coverage, the
new GOP proposal would maintain the employer health insurance bias."
Last but by no
means least "[i]nstead of expanding Medicaid, as Obamacare does, the
Coburn-Burr-Hatch proposal would reform it to give more flexibility to
states and allow Medicaid beneficiaries the option of using their tax
credit to purchase private coverage."
I don't think the
plan as written is fully sound from a structural viewpoint. In
particular, the continuous coverage rule is the kind of thing that's
easy to write down as a single sentence in a column but difficult to
turn into a clear piece of legislation. Turning that into a workable
regulation, especially in a world where which insurance plans are
available changes from time to time and place to place, would be a whole
giant process and you'd have to evaluate a specific proposal. But the
key thing about this is that it doesn't envision radically
remaking the health care system along free market lines. Relatively to
the status quo that existed in 2009, it would constitute modestly
remaking the health care system along liberal lines. Most of all, as a
political document it reflects an appreciation of the overwhelming
political power of the status quo. You can't kick those 25-year-olds off
their parents' insurance plan. You can't deny the currently insured the
peace-of-mind that comes from knowing that getting sick won't make them
uninsurable. You can't change tax policy in a way that's too disruptive.
And this plan isn't going to pass in 2014. It's not going to pass in
2015. And it's not going to pass in 2016. By 2017, Medicaid expansion
and subsidized exchange plans will be the new status quo. Are the
Coburns, Burrs, and Hatches of 2017 really going to be willing to blow
that up?
Bob
Jensen's universal health care messaging ---
http://www.trinity.edu/rjensen/Health.htm